Michael Hartnett doesn't call market tops, but this week he came close. The Bank of America chief investment strategist told clients the rush into stocks and tech is "likely fully complete in the next few weeks."
His advice for early June was simple: take some chips off the table.
June is unusually loaded with events that can move markets. OPEC meets, the World Cup kicks off, Trump turns 80, the G7 gathers, and the first Federal Reserve meeting under new chair Kevin Warsh wraps up.
Any one of those would be a news event on its own. Five in a row creates the kind of headline risk markets aren't pricing in.
Hartnett's bigger concern is inflation. Wholesale prices are running at 6% and consumer prices are knocking on 4%, with CPI on course to pass 5% by the November midterms if monthly gains don't slow.
The historical pattern is brutal. Once CPI crosses 4%, the S&P 500 drops an average of 4% over the next three months and 7% over the next six.
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Hartnett's own clients tell the story. BofA private clients managing roughly $4.5 trillion now hold 65.7% of their portfolios in stocks, a record, while their cash position sits at 9.8%, the lowest ever.
The semiconductor index is trading 62% above its 200-day moving average. That kind of stretch hasn't shown up since the Nasdaq's dotcom peak.
The BofA "Bull & Bear" indicator just climbed to 7.6 out of 10, and a reading of 8 triggers its formal sell signal. The gauge is the closest thing Hartnett has to a public sell call.
Bonds drew $28.1 billion in inflows last week, marking their 55th straight week of gains, while stocks took in $20.5 billion. Tech funds had their biggest week since February, and infrastructure funds set a record at $1.5 billion.
Hartnett still thinks investors stay tilted toward stocks and commodities into November. He's not saying sell everything, he's saying lock in what you've already made before the calendar gets loud.
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