Hartnett: Risk-Off Could Persist Until Dollar Peaks

Bank of America strategist Michael Hartnett expects a defensive stance among investors to persist until the US dollar's recent climb loses momentum. In his view, riskier assets are unlikely to win broad support while the currency keeps rising and bond yields remain near levels not seen in roughly twenty years.

The message points to a market waiting for two signals: a peak in the dollar and relief in fixed income. Until those conditions materialize, Hartnett suggests the mood will stay cautious rather than gravitate toward growth-sensitive trades.

He recommends what he calls "buying the humiliation," a strategy of adding bonds to portfolios while yields are elevated. The rationale is that high yields can offer investors compensation for the uncertainty, especially if the forces pushing rates and the dollar higher begin to fade.

Those forces, per the summary, include inflation worries tied to the Iran war, expectations of tighter monetary policy, and solid corporate earnings. Hartnett's framework leaves room for a shift once the dollar's advance stalls and bond yields start to retreat, but it does not call for an early move into risk.