Bear era begins with real rates at ‘crashes, panics and wars’ levels

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More than half of S&P 500 (SP500) (NYSEARCA:SPY) components are in bear market territory with real interest rates at levels that coincide with extreme events over the last 250 years, according to BofA Securities.

Geopolitics is exacerbating the inflation, rates and growth shocks of 2022 and real rates are so negative the levels are synonymous with “crashes, panics, wars past 250 years,” strategist Michael Hartnett and team wrote in Friday’s “Flow Show” note.

Bear era begins with real rates at 'crashes, panics and wars' levels

We “believe bull era of central bank excess, Wall St inflation, globalization ending, and bear era of government intervention, social & political polarization, Main St inflation & geopolitical isolationism starting,” Hartnett said.

A secular bull market is just beginning in tech (NYSEARCA:XLK) and PE, he added.

The percentage of stocks in bear market territory (off more than 20% from 12-month highs): “76% of Nasdaq (COMP.IND) (NASDAQ:QQQ), 51% of S&P500 (SP500) (SPY), 35% of ACWI (NASDAQ:ACWI); 47% of Nasdaq issues down >50%.”

“Disney (NYSE:DIS), Visa (NYSE:V), Salesforce (NYSE:CRM), Netflix (NASDAQ:NFLX), Facebook (NASDAQ:FB), Biotech (NYSEARCA:XBI), Twitter (NYSE:TWTR), PayPal (NASDAQ:PYPL), ARK (NYSEARCA:ARKK) at/below pre-COVID levels.”

Portfolios “should position for stagflation & dollar (USDOLLAR) debasement; 1970 show this bullish real assets, commodities (NYSEARCA:DBC), TIPS (NYSEARCA:TIP), small cap value (NYSEARCA:VBR), EM (NYSEARCA:EEM); note during big stagflation shock of 1973/4 only commodities worked, just like today; important to note that 2020s likely marked with quick & volatile boom-bust economic & investment cycles,” Hartnett added.

UBS highlighted five ways to position portfolios during the Russia-Ukraine crisis.

Bear era begins with real rates at 'crashes, panics and wars' levels

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