BofA Says Brace for Recession Shock After Worst Rout in 52 Years

A “recession shock” begins for markets following the worst first-half for the S&P 500 in more than 50 years, Bank of America Corp.’s Chief Investment Strategist Michael Hartnett says.

While expectations of aggressive rate hikes by the Federal Reserve are peaking, inflation expectations are not, and BofA’s bull and bear indicator remains at “maximum bearish” for a third week in a row, Hartnett wrote in a note.

Both stocks and bonds were rocked by outflows this week as investors fear the global economy could contract amid runaway inflation and hawkish central banks.

About $5.8 billion exited global stock funds in the week through June 29, although U.S. equities saw small inflows of about $0.5 billion, BofA said, citing EPFR Global data. Bonds had redemptions of $17 billion, the data show.

Markets have been roiled this year as investors dumped risk assets on worries of a looming recession while inflation remains sticky even as central banks kick off aggressive rate hikes.