Bank of America strategist Michael Hartnett warned that the excitement in the stock market has intensified the bubble risk after the Fed's rate cut, making bonds and gold attractive tools to resist economic recession or rising inflation.

Last year, this strategist was primarily bearish on the US stock market and previously expressed a preference for bonds in 2024. He stated that there is currently an expectation that the Fed will further relax policies and the earnings of S&P 500 index constituent companies will grow by around 18% by the end of 2025.

Hartnett said, "The risks haven't gone away, so investors are forced to chase the trend." However, he warned that the "bubble risk" is making a comeback and advised buying bonds and gold on dips.

The strategist also stated that in the event of an economic slowdown, stocks and csi commodity equity index outside the usa are good targets, with the latter being a hedge against inflation. He said that international stock prices are low and have begun to outperform U.S. stocks.

Global stock markets rose last Thursday as the market optimistically believed that the 50 basis point rate cut by the Federal Reserve timely opened a loose monetary policy cycle and prevented a recession in the US economy. The S&P 500 Index, which had fallen from its level in July, returned to its historical high. The technology-heavy NASDAQ 100 Index also surged 2.6%, marking its largest single-day gain in over a month.

However, signs of caution appeared in the market on Friday.

A survey conducted earlier this month by Bank of America found that investor confidence improved due to bets on an economic rebound. However, a US economic recession and accelerated inflation are considered to be the biggest tail risks for the market.

Hartnett previously warned that there might be a bubble in technology stocks during the AI frenzy.

Editor/Rocky