Another bubble has emerged from a banking sector crisis that has already brought down three regional US banks, Bank of America (NYSE:BAC) analysts led by Michael Hartnett say.
Investors should sell shares rather than buy them after the latest rate hike by the US Federal Reserve (Fed), according to these strategists.
Bank of America points to money market funds as the new hot asset. They point out that the assets under management of these funds exceed 5.1 trillion dollars, having increased by more than 300,000 million in recent years, collects MarketWatch.
Remember MarketWatch that the last 2 times money market fund assets increased, in 2008 and 2020, the Federal Reserve lowered interest rates.
According to Iraic.info, the difference this time is that inflation is a reality and the labor market is exceptionally strong, not only in the US but also in other industrialized countries.
History, according to the BofA analyst team, calls for selling before the latest interest rate rise. “The debt and stock markets are too eager for rate cuts and not fearful enough of a recession,” they say. After all, when banks borrow from the Fed in an emergency, they tighten lending standards, which results in less lending and thus reduces optimism for small businesses, which ultimately hurts the job market.
Published by Iraic.info, news and information agency.