BofA Warns of Looming Unemployment Shock, Recommends Selling Stock Rallies

Analysts at Bank of America (BofA) are warning of a collapse in the US labor market and a rise in unemployment next year.

They also encouraged selling of the stock market rally ahead of the growing job losses.

“Bears (like us) are concerned that unemployment in 2023 will be as big a shock to Main Street consumers as inflation in 2022,” said BofA analysts led by Michael Hartnett, who revealed that the global economy is doing well. every week for three months.

“We are selling risk rallies from here,” he said, reiterating his preference for bonds for the first half of 2023.

BofA’s Bull & Bear Indicator rose to 2.0 from 1.4 in the week to Nov. 30, indicating that the “buying signal” for dangerous goods is about to end, according to experts.

“The index was at its highest since May 2022 for bond index, credit quality, spreads, (and) hedge fund positioning,” he said.

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The opinion of these experts is similar to those of JPMorgan Chase and Goldman Sachs Group, who also warned of a possible recession next year.

Equity Funds Begin to See Outflows

The global currency saw $14.1 billion in outflows in the week to Nov. 30, led by the departure of US stocks, the largest weekly outflow in three months, according to BofA analysts.

He said that $ 6.1 billion is being withdrawn from the funds sold and $ 8.1 billion from mutual funds, citing EPFR Global data.

US equity funds gained $16.2 billion during that period, the most since April.

He said that about $2.4 billion went out of the international market, while the money market saw a total of $31.1 billion.

America’s largest stocks lost $14.5 billion, with US small-cap, growth, and value stocks also seeing redemptions.

Long-term economic optimism over a cooling labor market and signs of easing interest rates by the Federal Reserve has continued, Harnett’s team said.

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Labor Market Remains Strong, Long-Term Economic Outlook Remains Low

The labor market still looks strong right now, as 263,000 nonfarm payroll jobs were added to the American workforce in November, more than the 200,000 expected, according to the government’s Dec. 2.

Meanwhile, average wages rose by 0.6 percent over October, 5.1 percent over the same period in 2021.

The unemployment rate in the US was stable at 3.7 percent.

“Small business jobs hard to fill (relevant to Fed funds) & peak Atlanta Fed wage tracker,” BofA analysts said, “but bulls need wage growth to slow significantly without major job losses.”

Few Tips for Declining Interest Rate Increases in December

Stocks on Wall Street have also seen a rally since October, on hopes that the central bank will end inflation in time to avoid a major deficit.

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Investor sentiment was boosted, after Fed Chairman Jerome Powell announced on Nov. 30 that the Fed may start reducing interest rates at its next meeting in December.

The central bank is expected to reduce its next hike to 50 basis points, after four consecutive visits to 75 basis points.

However, the strong November jobs report is the last monthly jobs report before the Fed’s two-day Dec. 13-14.

The news is a sign to economists that job demand is still strong, which could delay the central bank’s policy stance next year.

The tech-heavy Nasdaq 100 was down 0.1 percent, after losing 1.2 percent on the report’s close.

Bryan Jung

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Bryan S. Jung is a native and resident of New York City and has experience in politics and law. He graduated from Binghamton University.

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