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(Bloomberg) -- Investors are now betting on a more market-friendly stance from President Donald Trump in the coming months, and fears about a US recession could diminish further if Friday’s key jobs report shows resilience, according to Bank of America Corp.’s Michael Hartnett.
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The strategist said market players were wagering on a “lower tariffs, lower rates and lower taxes” scenario. A big easing in financial conditions, combined with robust spending on artificial intelligence, would allay growth concerns “so long as payrolls don’t crack,” he said.
Hartnett reiterated his preference for international equities this year.
US stocks have recovered in the past two weeks on optimism that the US would engage in trade negotiations with key partners. However, weaker-than-expected economic data have kept sentiment shaky. On Friday, economists expect the jobs report to show a deceleration in nonfarm payrolls growth.
American assets have emerged as one of the biggest laggards after Trump imposed sweeping levies last month. The S&P 500 is down 4.7% this year, while the MSCI All-Country World Index excluding the US rallied 7.4% through Thursday.
Still, Hartnett said that for every $100 of inflow in US equities since the November presidential election, only $5 dollars have been redeemed in the past three weeks.
European stocks have remained in favor, with inflows of about $3.4 billion in the week through April 30, according to the BofA note citing EPFR Global data.
--With assistance from Michael Msika.
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