Huoxing Finance reports that on October 18, Bank of America Securities strategist Michael Hartnett stated in the latest Flow Show report that the Bank of America Bull-Bear Indicator fell from 8.1 to 7.4, breaking below the 8.0 threshold and ending the sell signal triggered on May 26. However, he emphasized that the end of the sell signal does not equate to a buy signal; tactically, the portfolio remains defensively positioned, with no immediate plans to increase exposure to technology stocks. Hartnett outlined prerequisites for returning to risk assets: the Federal Reserve must raise rates on October 28 to restore credibility, and concerns over AI financing must ease—neither of which has yet materialized. Meanwhile, market expectations for a Fed rate hike in October have dropped from over 50% to 14%, while the AI credit market experienced its worst week of the year: CoreWeave’s bonds have entered distressed territory, with the 5-year credit default swap (CDS) spread implying a default probability of approximately 63%. He noted that the cooling in market sentiment has not been accompanied by sufficient de-risking. Latest weekly data shows net inflows of $64.4 billion into equity funds and net outflows of $5.31 billion from cash funds. Bank of America’s private clients now hold a record-high equity allocation of 66.4%, while cash holdings have fallen to a historic low of 9.3%. According to October fund manager surveys, investor overweight positioning in technology stocks is the highest since August 2020. Regarding future direction, Hartnett identifies semiconductor prices as a key variable. If chip prices continue rising, he expects investors to return to technology stocks by mid-November and reverse their “short tech, long bonds” positioning as they enter 2027. Conversely, if semiconductor prices decline, he believes this signals further tightening in AI credit markets and a peak in capital expenditure growth, favoring bonds, with asset returns in 2027 shifting from capital appreciation to income generation. In terms of allocation, Hartnett has increased exposure to small-cap stocks, REITs, and discretionary consumer sectors—assets benefiting from peak yields—while maintaining a long-term overweight position in gold, commodities, and emerging markets.
Morgan Stanley's Hartnett: Sell Signals End, Semiconductor Prices Become Key Variable for Tech Stocks
MarsBitShare
Summary
On October 18, 2026, BofA strategist Michael Hartnett noted in the latest Flow Show report that the bank’s bull-bear indicator fell to 7.4, ending the sell signal issued on May 26. Technical analysis for crypto remains neutral, with no confirmed buy signal. Hartnett recommends a defensive posture, citing unmet prerequisites such as the Fed’s October 28 rate hike and relief in AI financing concerns, neither of which have yet materialized. Market expectations for a rate hike dropped to 14%, while the AI credit market experienced its worst week on record. On-chain trading signals continue to suggest caution. Hartnett views semiconductor prices as a key variable, predicting a tech rebound by mid-November if prices rise. He is gradually shifting toward small-cap stocks, REITs, and discretionary sectors, while maintaining long-term positions in gold, commodities, and emerging markets.
Source:Show original
Disclaimer: The information on this page may have been obtained from third parties and does not necessarily reflect the views or opinions of KuCoin. This content is provided for general informational purposes only, without any representation or warranty of any kind, nor shall it be construed as financial or investment advice. KuCoin shall not be liable for any errors or omissions, or for any outcomes resulting from the use of this information.
Investments in digital assets can be risky. Please carefully evaluate the risks of a product and your risk tolerance based on your own financial circumstances. For more information, please refer to our Terms of Use and Risk Disclosure.