Bank of America strategist Michael Hartnett says investors should hold off on buying stocks despite this week’s sharp market declines. He points to conditions in other asset markets that have yet to fall into place.
Hartnett identifies three signals that must align before a sustained return to equities becomes likely. These indicators span credit, volatility, and interest rate markets rather than stocks alone.
The first involves credit spreads, which have yet to widen enough to signal a durable market bottom. Until corporate bond spreads reflect real stress, equity risk remains elevated.
The second centers on the CBOE Volatility Index, which has not reached levels historically associated with capitulation. A spike in the VIX often marks the point where selling pressure exhausts itself.
The third is a meaningful drop in Treasury yields, which would ease pressure on equity valuations. Yields remain elevated, keeping borrowing costs high for companies and consumers alike.
Hartnett’s framework suggests that sharp equity selloffs alone do not create buying opportunities. Cross-asset confirmation has preceded past recoveries, and that confirmation is absent now.
His view carries weight because Bank of America’s fund manager surveys are widely watched on Wall Street. The warning comes as investors weigh whether recent losses represent a bottom or a pause.
For now, Hartnett’s message is patience. Rushing back before credit, volatility, and rates align risks catching further downside rather than a recovery.
