The team of analysts at the Bank of America (BofA) describes the current market situation as a "new volatility era". Under the circumstances, they foresee a spike in technology stocks.
Large market players have invested billions of dollars in shares of popular companies despite a prolonged bond market rout and sharp losses on Wall Street. However, the start of March 2021 became a turning point in the bond market. The yield on 10-year US Treasuries jumped by approximately 45 basis points in the last month. This triggered a sell-off in equities and the market capitalization plunged by $4 trillion.
After analyzing the current situation, experts at BofA noticed that inflows of equity funds came in at $22.2 billion in the week to March 10. The funds were distributed as follows: investments in tech companies and the financial sector accounted for $2.3 billion and $2 billion respectively.
The current slump in the bond market did not force investors to change their strategy. Notably, 62.2% of BofA clients invested in stocks as planned. Analysts believe that a $29 trillion monetary and fiscal stimulus has led to an addictive dependence of the Federal reserve on Wall Street. Michael Hartnett, the bank’s chief investment strategist, says such dependence will allow the Fed to gain control over the yield curve in the future.
