Bank of America: The advantages of the U.S. stock market are beginning to weaken, recommending to go long on the Chinese stock market
Bank of America’s well-known strategist Hartnett expects that the U.S. stock market will gradually weaken by early 2025. Year-to-date, the stock market returns in countries such as Brazil, Germany, the UK, and China have exceeded the S&P 500 index, and the "seven giants" technology companies are unlikely to support a long-term rise in U.S. stocks. At the same time, expectations for geopolitical stability have improved, with other markets preemptively reflecting the peak of U.S. stock advantages. Moreover, U.S. Treasury yields may fall below 4%. The strategist advises investors to go long on the Chinese stock market. Data shows that the China concept ETF KraneShares has seen net inflows for three consecutive days, with the single-day inflow reaching the highest level since October 3
On February 7th, Friday, Eastern Time, Bank of America strategists expect that after years of strong growth, the performance of the U.S. stock market will gradually weaken starting in early 2025.
Notable strategists including Michael Hartnett pointed out that stock markets in multiple countries, including Brazil, Germany, the UK, China, and Canada, have outperformed the S&P 500 index year-to-date. The main driving force behind the U.S. stock market—the "seven giants" tech companies—can no longer provide long-term support for the market. At the same time, the narrative regarding the structural advantages of the U.S. economy is gradually weakening. Additionally, investor expectations for geopolitical stability in the Middle East and Ukraine are also improving.
Bank of America Suggests: Go Long on Chinese Stocks
Bank of America advises investors to go long on Chinese stocks, as they expect that the trade and tech war between the U.S. and China will not escalate further.
Recently, investor interest in the Chinese internet sector has significantly increased, with a strong capital inflow effect for Chinese internet ETFs.
Data compiled by Bloomberg shows that KraneShares' China Internet ETF (KWEB) had a net inflow of $287 million on the most recent trading day with available data, increasing its asset size by 4.8% to $6.26 billion, reaching the highest level since November 13. This is the largest single-day increase since October 3 and marks the third consecutive day of recorded capital inflows.
Over these three days, the cumulative inflow reached $363.2 million, driving the total assets of the fund up by 6.4%. Over the past year, the fund has attracted a cumulative net inflow of $205.9 million.
U.S. Treasury Yields May Fall Below 4%
Hartnett's team stated that currently, most global stock markets outside of Wall Street are "preemptively reflecting the peak of U.S. advantages." However, they caution investors that if the German elections or peace negotiations between Russia and Ukraine start soon, it may prompt investors to take profits in European stock markets.
In the bond market, Bank of America expects that as President Trump plans to control government spending, curb debt growth, and seek Congressional approval for new tax cuts, U.S. Treasury yields may fall below 4%.
Capital flow data indicates that investor risk aversion has increased. Bank of America cites EPFR Global data showing that in the week ending February 5, money market funds attracted $46.8 billion in inflows, with $16.6 billion flowing into bond funds, while stock funds experienced an outflow of $600 million