Michael Hartnett wrote in an Oct. 15 note that the risk-on mood of the summer has cooled. He pointed to a broad selloff in global bonds that has lifted real yields to 3%, while higher energy prices and sticky inflation add to the worry list. As he put it: "We continue to lean risk-off next 3-4 weeks given 3% real yields."
He also characterized the near term as unsettled, saying investors are likely to seek shelter given rising borrowing costs and turbulence tied to the U.S. midterms and the AI trade.
That stance tilts more hawkish than what the broader market is pricing in. Swaps traders trimmed wagers on a hike on Friday after Fed Chair Kevin Warsh offered nothing to shake the expectation that rates will be kept unchanged at month end.
Hartnett said investors are increasingly asking whether the heavy spend on AI infrastructure - and the borrowing behind it - will pay off. Even so, wagers on AI have propelled U.S. stocks, with technology funds taking in a record annualized $196 billion in 2026, according to EPFR Global data cited by BofA.
The stance on tech was blunt: "We don't add tech."
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In plain English: Hartnett is mapping a near term tilt toward safety as higher real yields bite and policy uncertainty lingers. That means his team's barbell leans to areas that benefit from today's yield backdrop while steering clear of adding more tech exposure fueled by AI enthusiasm.
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