BofA Strategist's Radical Call: Global Stocks in "Melt-Up", Advises "All In" Until Bond Market Collapse
Recently, Michael Hartnett, Chief Investment Strategist at Bank of America, made an extremely aggressive statement that has drawn widespread attention in financial markets. Hartnett declared that a policy-driven global stock market "melt-up" is underway and recommended investors adopt an "All In" strategy until long-term bond yields breach a critical "breaking point," triggering a market collapse.
Against the backdrop of a complex and volatile global economic recovery and persistent geopolitical uncertainties, Hartnett's view has undoubtedly detonated like a bombshell in financial circles. While the headline "Trump 'Bids Farewell to Rehab, Embraces the Golden Triangle'" carries a somewhat satirical tone, it also reflects the complexity and unpredictability of the current market environment.
A "melt-up" refers to a rapid and substantial surge in stock prices over a short period, often accompanied by extreme investor optimism. Hartnett argues that global equities are currently in such a policy-fueled melt-up phase. Governments worldwide have rolled out massive fiscal stimulus and accommodative monetary policies to counter pandemic shocks and economic downturns. The resulting flood of liquidity has provided a solid foundation for the stock market rally.
From a market performance perspective, despite numerous global economic challenges in recent years, major stock indices have repeatedly hit record highs. Take U.S. equities, for example—the S&P 500 and Nasdaq indices rebounded swiftly after brief pandemic-induced plunges and have since climbed to historic levels. Beyond improving corporate earnings, the deluge of policy-driven liquidity has played a pivotal role.
From a policy impact standpoint, increased government fiscal spending has directly or indirectly benefited numerous companies, boosting market expectations for future corporate profits. Meanwhile, central banks' maintenance of low or even negative interest rates has diminished the appeal of fixed-income assets like bonds. In pursuit of higher returns, investors have poured capital into equities, further driving up stock prices.
However, Hartnett also clearly warns that this melt-up is not endless—the key trigger lies in long-term bond yields. Once yields surpass a critical "breaking point," a market collapse will ensue. Bond yields and prices move inversely; a sharp rise in yields implies a steep drop in bond prices. At that point, the bond market may regain its appeal, prompting capital to flow back from equities. Moreover, higher yields would increase corporate borrowing costs, pressuring earnings and ultimately weighing on stock performance.
Hartnett's "All In" strategy is highly controversial for investors. On one hand, those who capitalize on this melt-up could reap substantial gains. On the other, going "All In" means fully committing to equities—a market reversal would expose investors to severe losses.
Currently, global financial markets are in a state of heightened sensitivity, where any minor disturbance could trigger significant volatility. While Hartnett's stance is radical, it serves as a wake-up call for investors, urging market participants to closely monitor policy shifts, bond yield trends, and other critical factors. In the pursuit of returns, prudent risk assessment and balanced asset allocation remain essential to navigating the complex and ever-changing financial landscape.