BofA Market Outlook – Risk‑Asset Support Conditions

Bank of America strategist Michael Hartnett wrote that investors are likely to continue buying the dip rather than exit risk assets, provided two closely watched technical levels remain intact.

  • The Roundhill Magnificent Seven ETF must keep its 200‑day moving average near $65.
  • The AUD/JPY currency pair must hold support at 110.

Hartnett notes that tighter financial conditions are pushing markets away from leverage, and speculative froth has already been flushed out in pockets such as Korean small‑cap tech, which has fallen 36% over the past eight weeks. He frames this as a rotation rather than a retreat.

He describes the current environment as a "no consensus" scenario – no clear economic landing, no Federal Reserve rate hike, no AI‑capex cut, and no Democratic sweep in the U.S. midterms – which he says has kept bearish pressure largely absent in the first half of the year.

Quoting his note, Hartnett writes: "Can't buy bonds, can't sell stocks," and highlights that the prevailing strategy among investors is "anything but bonds."

The note also points out the rarity of the U.S. CPI rate of 4.2% matching the unemployment rate of 4.2%, a convergence historically seen mainly in years that preceded Fed tightening cycles.

Revisiting his presidential‑cycle framework, Hartnett observes that President Donald Trump's second term is on track to be only the fourth administration since 1873 to deliver four consecutive years of stock market gains, making the upcoming midterms the "most binary Wall Street event" for the second half of the year.

Recent Capital Flows

  • Stocks: $56.4 bn entered equity markets in the past week, the fourth‑largest weekly inflow of 2026.
  • Cash: $39.5 bn moved into cash, pushing money‑market fund assets to a record $7.9 trillion.
  • Bonds: $31.3 bn flowed into fixed‑income securities.

Sector‑specific flows showed technology attracting $18.8 bn, positioning the sector on pace for a record $183 bn inflow in 2026. China equities received $9 bn, the largest weekly inflow since December.

The BofA Bull & Bear Indicator remained at 9.5, an extreme‑bullish "sell signal" reading, underscoring the analyst’s view that risk assets will stay supported as long as the two technical thresholds hold.

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