The New York Stock Exchange has traders on it.
Spencer Platt is a photographer.
Bank of America said in a Friday note that investors should sell the rally in stocks.
BofA's Michael Hartnett thinks the Fed will raise interest rates by a half a point in March of 2022.
The bank pointed out that there was a striking similarity between the tech bubble of 2000 and today.
The stock market's recovery rally over the past week represents an opportunity for investors to sell ahead of an upcoming Fed interest rate shock, according to a Friday note by Bank of America's Michael Hartnett.
As interest rate hikes are about to rock Wall Street, Hartnett recommends investors to sell the rip and buy the dip, as there is a similar unwind in tech stocks compared to the dot-com bubble.
The Fed could hike interest rates next week according to Hartnett. The market will price in a 0.50% interest rate hike in March 2022, if they don't, because of the red hot labor market, Hartnett said.
If Hartnett's Fed rate hike expectations pan out, that would be a shock to Wall Street, with most market participants expecting the Fed to start with a 0.25% rate hike in the second half of 2022. The yield curve says "Fed coming" but investment grade bonds and FAANG don't.
The mega-cap tech complex consists of five stocks and is driving the majority of the Nasdaq's 23% year-to-date gain. Five stocks are Microsoft, Apple, Apple, Apple, and Nvidia.
Hartnett said that the bubble in speculative froth has popped and that the breakdown of Ark Invest's Disruptive Innovation fund is closely watching the descent of the Invesco fund during the 2000 dot-com unwind. The fund's investment strategy was defended by Ark's Cathie Wood.
Bank of America.
After a big sell-off, investors shouldn't get too excited about short-term rallies in the stock market, as they tend to serve as head fakes to bullish investors during a declining market. The stock market bottomed in October 2002 but the stock market staged 11 dead cat bounces with rallies as high as 45% between April 2000 and August 2002.
If the Nasdaq doesn't hit record highs in the near future, it will represent a dead cat bounce, as it has since rallied as much as 4.5% before continuing slightly lower.
Business Insider has an original article.
