Premium"A Tail Of Two Cities”: Hartnett Says "Start Adding Some Bonds"
Last Saturday, BofA’s Michael Hartnett unveiled the two numbers that would trigger a risk-off deleveraging cascade: global financials (IXG) below $125 and the MOVE above 125 (IXG is just above the redline while MOVE hit 110 this week). He also said policymaker panic to cap yields had begun and it was time to “nibble” bonds. Since then the 10Y yield has hit 5.33%, the highest since 2002, and largely driven by Brent back above $100. But Hartnett hasn’t flinched. If anything, this week he goes from nibbling to telling clients to “buy humiliation” in bonds. He also takes a long walk back to the 1870s to explain how the last two great capex bubbles, both in railroads, came undone.
In his latest Flow Show, titled “A Tail of Two Cities” (available to pro subscribers here), Hartnett starts with his weekly scoreboard. Another week, another leg down for gold, which went from -1.1% YTD to -3.8% and now trails cash by a comfortable 6.5 points. Meanwhile, bond holders are still being reminded that “safe haven” and “positive return” are two different things: