U. S. stocks have fallen this year, and Bank of America analyst Michael Hartnett, who has always been pessimistic, has become the most prospective analyst on Wall Street.

When the Hartnett first warned of a recession and a bear market, the S & P average target price was around 5000.

Recently, Hartnett pointed out in a reportThe bear market in US stocks ended in October and is expected to fall to 3000 points, with 3600 points becoming the new bull market.

In the report, Hartnett first emphasizedThe big picture for 2022 is three shocks-"inflation shock = interest rate shock = recession shock", followed by an "interest rate shock", in which the value of one currency against another soars in a short period of time, which will eventually lead to a recession.

The main line of the 1920s is institutional change-social inequality, populism / progressivism, geopolitical conflicts, net zero carbon emissions, de-globalized economy, demographic decline, high inflation driven by inflation, high interest rates, high volatility & low valuations, the market is more inclined to "cash, commodities, physical assets, volatility, small-cap stocks" and so on. All this will hurt bonds, credit bonds, private equity and technology stocks.

Then, in the report, Hartnett reviewed the weekly capital flow.Almost every type of asset is redeemed in large quantities.It starts with $1.4 billion in gold, goes to $5.2 billion in stocks, and ends up with $12.3 billion in bonds.

The pain in the credit bond market is far greater than in US equities, where $27 for every $100 of IG/HY/EM bonds bought since April 20 has been redeemed, while global equities have seen outflows of only $4 for every $100 inflow since January 21.

Against this backdrop, the asset sell-off intensified last week, with emerging market debt redemptions reaching their highest level since March 20 ($6.1 billion), bank loans falling by the most since March 20 ($1.6 billion), technology and financial stock outflows the largest since September 2016 ($1.7 billion), and materials stocks the largest outflow since October 2014 ($2 billion).

In the face of declining inflows, the BofA bull bear market index is currently 1.5, down from 3.8 in February this year.It shows that the market mood is "extremely pessimistic".

Second, in a historical speech, Hartnett points out that in 19 bear markets over the past 140 years, the average price of u.s. stocks has fallen by 37.3%, with an average duration of about 289 days. Combined with the current economic situation:

The bear market ends on October 19th, with the S & P 500 at 3000 and the NASDAQ at 10000.

About how to hedge against a bear market? According to Bank of America,Good hedging tools for Japanese yen and Swiss francsThe yen has risen sharply and rapidly in almost every Wall Street crash over the past 40 years.

Also historically, what is the reasonable price-to-earnings ratio when earnings per share / gross domestic product (EPS/GDP) falls? Hartnett says:

Although some people say that 19 times of the 21st century is the most appropriate, but I thinkThe 14 times of the 20th century is more suitable for stagflation.

Hartnett also discussed the most recent "recessions", noting that the housing and labour markets were only at an inflection point, with US loan applications down 28 per cent from the start of the year and job creation in the retail and leisure sectors.

Finally, Hartnett points out that banks are arguably the safest components of the financial system, but the KBW Banking Index (BKX) is below the highs of 2007, 2018 and 2019. Hartnett says:

If it falls below 100 points, it will trigger a recession or a credit crisis, or, to put it another way, who will be Lehman Brothers in the recession triggered by monetary tightening?

According to Hartnett, $18 trillion of negative-yielding debt fell to $2,000bn in nine months, meaning the risks of liquidation, deleveraging and default are high; in fact, systemic risks from the collapsing leveraged loan market, high exposure to syndicated loans, sovereign wealth funds, speculative technology credit events, shadow banking, US consumer pay-as-you-go models and zombie companies have become increasingly apparent. However, this is at a time when the Fed has not yet started to shrink its balance sheet.