Phil Rosen here. On Friday, I wrapped my final day at the Messari Mainnet conference in New York City.
There, I rubbed shoulders with crypto enthusiasts, blockchain founders, and angel investors who all seem convinced the future of finance is decentralized — and that after parties are mandatory.
For the small price of sleep deprivation, last week I took note of dozens of evening festivities ranging from panel talks to rooftop happy hours and even a yacht party.
And below, I'm breaking down what Bank of America has to say about the worst bond market decline in over 70 years.
Buckle up.
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Mainnet 2022 New York City
1. The bond market is in the middle of a historic crash and it'll hammer stocks, according to a Friday note from Bank of America.
The US Aggregate Bond ETF is down 15% in 2022, and global bonds have seen even more pain.
"Bond crash in recent weeks means highs in credit spreads, lows in stocks are not yet in," BofA analysts said, adding that if it gets worse it could unwind the long US dollar, long US tech, and long private equity trades.
These are the trades that helped catapult mega-cap tech names like Apple, Amazon, and Alphabet.
If those widely-held, crowded positions become losing bets, BofA said, it would mean a sell-off in stocks.
"True capitulation is when investors sell what they love and own," the firm noted.
Bank of America is by no means alone in its downbeat forecast. Goldman Sachs on Friday slashed its year-end expectation for the S&P 500 to 3,600 from 4,300.
"The expected path of interest rates is now higher than we previously assumed, which tilts the distribution of equity market outcomes below our prior forecast," Goldman strategists said in a note, adding that the outlook is unusually murky.
"The forward paths of inflation, economic growth, interest rates, earnings, and valuations are all in flux more than usual, with a wider distribution of potential outcomes."
What's your stock market outlook heading into year-end? Where is the S&P 500 going to end 2022? Email prosen@insider.com or tweet @philrosenn.
In other news:
FILE - In this Aug. 12, 2019, photo specialist Peter Mazza works at his post on the floor of the New York Stock Exchange. Stocks of companies that do lots of business with China are obvious targets to sell when trade worries rise, and they’ve lagged sharply behind the rest of the market whenever President Donald Trump sends out a tariff tweet. But investors are also looking way beyond these first-order effects, as they pick out which stocks look most vulnerable to the trade war.
3. Earnings on deck: Max Healthcare Institute Ltd Registered Shs, Neil Industries Ltd, and more, all reporting.
4. Ray Dalio said his hedge fund Bridgewater Associates is up around 25% this year. He broke down two ways investors should approach the market as it is due to drop another 20% — and explained what area he's bullish on in the long run.
5. Wharton professor Jeremy Siegel said Jerome Powell is making one of the biggest policy mistakes in the Fed's 110-year history. It's the same exact mistake the Fed made one year ago, Siegel noted — and that could tip the US economy into a recession.
6. The IEA's executive director slammed Russia's plan to switch gas exports from Asia to Europe. The Kremlin has "already lost the energy battle" against the EU, Fatih Birol said. He thinks the pivot will take at least 10 years: "You're not selling onions."
8. The S&P Global exec in charge of the firm's DeFi efforts broke down Wall Street's biggest hurdles to institutional adoption of crypto. In comments at the Messari Mainnet conference, the Chief DeFi officer said institutional capital will flood into crypto once there's more regulatory clarity. Get the full details here.
10. As stocks sell off, Fundstrat's Tom Lee is sticking to his bullish year-end stock market forecast. Lee argued the Fed could actually do far less tightening, since the market is "doing [the] Fed's work" already. Here's what you want to know.
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