Short U.S. stocks and short-term Treasurys until Halloween, Bank of America strategist says

He’s expecting a policy panic in November — specifically the G-20 meeting in Bali, scheduled for Nov. 15 and 16.

Recent interventions by the Bank of Japan, to buy the yen, and the Bank of England, to buy gilts, he said were neither credible nor coordinated, so impotent. A Fed and U.S. Treasury panic would require a U.S. credit event, he added.

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“Markets stop panicking when central banks start panicking,” Hartnett said. Both the S&P 500
SPX,
-1.51%
and U.S. government bonds
TMUBMUSD10Y,
3.828%
have tumbled this year.

“Wall Street disorder in 2022 reflects painful regime change as bullish deflationary era of peace, globalization, fiscal discipline, QE, zero rates, low taxes, inequality gives way to inflationary era of war, nationalism, fiscal panic, QT, high rates, high taxes, inclusion,” he said.

Wars, he notes, are inflationary, pointing to the $1.4 trillion of fiscal stimulus from the U.K. and European Union to ease the energy shock and build the military.

He said U.K. equity outflows are on pace for the worst year ever. There also was the biggest outflow from investment grade, high yield and emerging market debts in 13 weeks, and the largest outflow from Treasury-inflation protected securities since May.