Hartnett: This Is The Best Hedge Against Inflation Reacclerating In 2025

For much of the past 6 months, Bank of America chief strategist Michael Hartnett has been pounding the table on why going long bonds will be the top trade (and biggest "pain trade" for so many who are still short treasuries) of the second half of 2024. For those who missed it, his thesis was simple: with the US economy already sputtering and with fiscal stimulus "as good as it gets" since it will be virtually impossible to pass another massive fiscal stimulus in the years to come, this means that - as Hartnett predicted back in May - "at the margin monetary policy finally gets easier as fiscal gets tighter next 12 months."

As usual, Hartnett was a contrarian (a stance which has helped him more than hurting him in the past 4 years), and he urged traders to go long 10Y paper just as 10Y Treasury yields hit a 2024 high of 4.7%, and Treasury futures were trading at the lowest price since last October's recession scare.

Fast forward to today when after the recent dismal jobs data which "shocked everyone" (at least those who had not been paying attention to know just how bad the labor market truly had been below the surface, as we have documented again and again), banks are now racing to see who can come up with a more dovish forecast (Citi and JPM are head to head here with both begging the Fed to panic, and predicting two 50bps rate cuts in the next two FOMC meetings). And with the market once again convincing itself - for the third year in a row - that the Fed is set to unleash an epic rate cutting spree, yields have indeed tumbled, plunging a whopping 100bps since Hartnett started urging his clients to buy bonds back in April.