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Bull Market Fears: Bond Yields Hit 5%, Risk Assets Unfazed
14 Jun
Summary
- Bond yields reach 5% as strategist notes bull market end conditions.
- Investor allocation remains bullish, ignoring rising capital costs.
- Technology funds attract record inflows, offsetting other withdrawals.
Bank of America strategist Michael Hartnett observes that investors are maintaining a strong commitment to risk assets, even as long-dated bond yields have reached 5%. He notes that conditions typically associated with the end of bull markets are emerging, such as increased capital costs due to rising yields.
Hartnett pointed to historical parallels, suggesting that 2026 could resemble 1994, a period marked by aggressive Federal Reserve rate hikes following unexpected employment data. Inflation is reportedly tracking above 5% as midterm elections approach, with the unemployment rate closely mirroring the CPI.
Bank of America's Bull & Bear Indicator has maintained its sell signal for four consecutive weeks. This trend is largely influenced by ongoing substantial inflows into technology-focused investment funds, which have outweighed outflows from high-yield debt and emerging-market bond funds. Global equity funds saw significant new money, with technology strategies alone drawing a record $12.3 billion.
