In a client note, Hartnett said market nerves are likely to persist until today's elevated bond yields ease back from peaks not seen in more than two decades. He linked the jump in yields to a blend of forces: inflation worries tied to the Iran war, expectations for additional monetary tightening, and strong corporate earnings.
He highlighted that the dollar's 3% rebound from its September trough has come alongside investors pulling money from risk assets to build cash buffers. Recent trading patterns, he added, suggest leverage is being cut and overall risk exposure dialed down. His playbook line: "buy the humiliation" by beginning to add bonds.
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Hartnett sees a potential safety net in the form of more forceful Treasury buybacks from the US administration, especially if rising yields are viewed as putting the AI investment wave at risk before the November US midterms. On the flip side, he warned that the outlook would worsen if small and mid-cap shares start dropping as sharply as banks. That would signal that confidence in robust economic growth has already crested, a setup he said would likely weigh on tech stocks.
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