Bank of America Hartnett: The "sell signal" for U.S. stocks has ended, but the pain for American consumers is just beginning, and "April 2" is coming

In the past few weeks, the U.S. stock market has experienced one of the most rapid adjustments since the pandemic, but Bank of America believes the "sell" signal has ended.

In December last year, Bank of America's chief strategist Michael Hartnett's "sell" signal successfully predicted the market peak, which subsequently triggered a 10% adjustment in the S&P 500 index within 20 days, marking the fifth-fastest record in 75 years. The Nasdaq fell by 14%, and the "seven sisters" of tech stocks plummeted by 20%, with global stock indices averaging a 5% decline.

However, regarding the recent pullback in the U.S. stock market, this Bank of America strategist refused to continue shorting U.S. stocks, insisting that this is merely an adjustment rather than a bear market. Hartnett stated:

“When policymakers start to panic, the market will stop panicking.”

Signals of Market Bottom Emerging, But Not Fully In Place

Bank of America's latest fund manager survey shows that its cash level has jumped from 3.5% to 4.1%—the largest increase since March 2020, ending the "sell" signal triggered on December 17 last year.

Although the cash level has exceeded the critical 4% threshold, Hartnett believes that other bottom signals have not yet fully emerged, advising investors to "focus on their actions, not their words."

The report also adds that after the Federal Reserve announced its latest interest rate decision, the market reaction was characterized by divergence: the 2-year U.S. Treasury yield behaved as if the Fed's stance was dovish, while the dollar acted as if the Fed's stance was hawkish.

Hartnett believes this asset performance will only lead risk investors to continue to wait and see.

He suggests that when the Bank of America fund manager survey cash level exceeds 4%, high-yield bond spreads approach 400 basis points, and stock fund outflows accelerate, buy the S&P at 5,300 points.

American Consumers Facing Pressure

It is worth noting that the pain for American consumers is just beginning.

Bank of America's report shows that in the later stages of the pandemic, U.S. household stock wealth surged to $56 trillion, an increase of $9 trillion. However, according to Bank of America's private client stock data, Hartnett expects that by the first quarter of 2025, U.S. household stock wealth may decrease by $3 trillion.

Meanwhile, U.S. fiscal, monetary, and trade policies are currently hawkish rather than dovish, which means the U.S. yield curve will invert again.

April 2 Tariff Deadline: Is "Panic Day" Approaching?

Hartnett stated that while the biggest asset price catalysts in the first quarter are artificial intelligence and digital currencies, rather than tariff threats, the upcoming April 2 "tariff deadline" has begun to affect global data. For example, the optimism of small businesses in Canada has fallen to a historical low, as U.S. tariffs are expected to jump from 2-3% to over 10%.

Hartnett summarized that bonds and gold are much less vulnerable to tariff policies than U.S. and international stocks, and he also pointed out:

"While everyone thinks April 2 will be the 'panic peak day,' it may actually depend on who (Trump) plays golf with on April 1."