Bank of America's Hartnett: Sell US stocks on highs, buy gold on lows.

The market is shifting from the "American exceptionalism" to "American denial", and Bank of America's global strategist, Michael Hartnett, advises investors to sell US stocks at high levels and buy international stocks and gold at low levels. According to a research report released by Hartnett on the 24th, recent fund flows show that $800 million flowed out of US stocks, while $3.3 billion flowed into gold. This indicates an increasing preference for gold in the market. As global economy rebalances, funds are flowing from the US market to other regions, especially emerging markets and Europe. This trend in fund flow is supporting gold prices. Gold has been the best performing asset this year (+26.2%), followed by government bonds (+5.6%) and investment grade bonds (+3.9%), while US stocks have fallen by 3.3%. US household stock wealth has decreased by approximately $6 trillion this year. Hartnett suggests "Stay BIG, sell rips", meaning to go long on Bonds, International Stocks, and Gold. Investors should sell US stocks at high levels when they rebound, instead of blindly chasing the rally. Hartnett: The market is at a historic turning point Hartnett states that financial assets have shown clear trends from the beginning of the year: gold is leading (+26.2%), bonds are performing well (government bonds +5.6%, investment grade bonds +3.9%), while US stocks (-3.3%) and the US dollar (-8.5%) have significantly declined. Recent fund flows show that all regions' stock markets have seen inflows (Europe $3.4 billion, emerging markets $1 billion, Japan $1 billion), but only US stocks recorded outflows of $800 million; gold saw inflows of $3.3 billion. The current trend indicates a rebalancing of the relationship between Wall Street and Main Street. Bank of America's data shows that US household stock wealth has decreased by approximately $6 trillion this year, and the US private sector financial asset to GDP ratio has decreased from over 6 times to 5.4 times. Hartnett believes that this change marks the end of the era of "we have never been so prosperous" - with low interest rates, over $30 trillion in global policy stimulus, a 9% US government deficit, and AI prosperity. Three key drivers for change Hartnett believes that the current market correction was triggered by the "3B" factors: Bonds: US treasury yields have experienced the fastest 50 basis point increase since May 2009 Base: Trump's approval rating has decreased from 53% to 46% Billionaires: Tech giants' market cap has evaporated by over $5 trillion To reverse the trend of "sell on rallies", the market needs three factors: Interest rate cuts: Market expects a 65% chance of a rate cut at the June 18th FOMC meeting, and 100% chance at the July 30th meeting Tariffs: Easing of Trump's tariff policy Consumers: US consumer spending remains resilient Global revaluation and weak dollar Hartnett states that the trend for stocks and credit valuation will peak by 2025. Historically, the S&P 500 PE ratios: - averaged 14 times in the 20th century (during World Wars, the Cold War, the Great Depression, and stagflation periods) - averaged 20 times in the 21st century (during globalization, technological advancement, and loose monetary policy periods) - In the first half of the 2020s, 20 times may become the PE ratio bottom - In the future, 20 times may become the PE ratio ceiling Hartnett believes that the continued depreciation of US dollar assets is the clearest investment theme, and the surge in gold prices is a clear signal of this trend. The depreciation trend of the US dollar will benefit commodities, emerging markets, and international assets (Chinese tech, European/Japanese banks). This article is a reprint from "Wall Street See", author: Zhang Yaqi; GMTEight editor: Wang Qiujia.