Bank of America’s chief investment strategist, Michael Hartnett, believes the bull market is likely to come to a crashing end due to several key catalysts, including the recent Wall Street Bets revolution.
Michael Hartnett expressed concern regarding recent events, most recently with Wall Street Bets. The investment strategist believes that several issues in the United States could lead to dramatic changes.
Catalysts to End the Bull Market
Hartnett outlined three key issues that could end the 2021 bull run. The recent Wall Street Bets Reddit revolution, he believes, only accelerated this.
Society has reached “peak capitalism”, Hartnett claimed. The major issue with the current climate is the imposition of new regulations. This can be credited to the new U.S President and the Democratic party taking over the White House.
The effects of last week’s fiasco with Wall Street Bets is likely to accelerate new regulatory measures. These measures could include changes to Wall Street, trading platforms and investors.
Hartnett also expects rates to rise. This can be seen as the US 10-year Treasury rate is already slowly moving upwards. Rates will affect stocks that have been able to benefit from the current bull market.
Furthermore, a redistribution of wealth could be expected. This could be the form of increased wage inflation, and wealth taxation for the rich. This would likely redistribute wealth from Wall Street to Main Street, says Hartnett.
Michael Hartnett explains that the second quarter of 2021 could see a 10% correction. That outlook sees the current financial situation mirroring the 1970s with stagflation. Stagflation relates to an increase in inflation while stagnant economic output occurs.
Course of Measures to Take
Hartnett further explained what he believes people should be doing to prepare for such a situation. He explains that people should move into inflation assets and sell deflation assets.
He also suggested that people consider owning real assets instead of financial assets. Hartnett pointed out that real estate investment trusts (REITS) or actual real estate would be good options to consider.
2020 was a turbulent year, especially taking into account the Covid-19 Pandemic. The U.S government measures are propping up the economy through quantitative easing. Washington is also assisting people in need by offering stimulus checks as relief.
The ongoing effects cannot go on forever, especially in conjunction with the recent spotlight on a dysfunctional Wall Street thanks to Wall Street Bets. All this has simply accelerated moves to look at the entire financial market system in the United states.
It is likely that the bull run could experience a crash with all the negative catalysts slowly aligning.
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