By Senad Karaahmetovic
The unemployment rate in the U.S. (3.7%) is “abnormally low” and is forcing the Fed to commit a “policy mistake,” according to Bank of America strategists. The average unemployment rate over the past 50 years is 6.2%, they added.
High inflation and a hot labor market have fueled central banks tightening that is likely to extend into mid-2023, forcing a “hard landing,” the strategists told BofA’s clients in his regular weekly note.
“Quicker labor markets break quicker end to bear market, start new Wall St bull market,” the strategists wrote.
In the meantime, risk sentiment is improving with BofA Bull & Bear Indicator jumping to 3.1 (from last week’s 2.6%) and sitting at the 9-month high. They “blame” improving equity breadth and credit technical.
As far as key flows in a week to Wednesday are concerned, the strategists note $18 billion inflows to stocks and $31.1B outflows from cash (largest in 3 months).
They also noted the largest inflow to passive equities ($43.7B) as well as the largest outflow from active equities ($25.8B) since December last year. Investors also facilitate the largest inflow to U.S. equity value funds ever ($14.3B).