The stock market is about to have a 'final melt up'
Ivan Alvarado/Reuters
Stocks could get a huge boost as investors worry about missing gains, according to Michael Hartnett, the chief investment strategist at Bank of America Merrill Lynch.
According to a note from Hartnett titled "The Final Melt Up," the shift of investors from defensive stocks (such as industrials and telecoms) to more cyclical companies (retail, tech, and consumer goods) shows that investors' appetite for risk is growing.
This will create demand for stocks and drive the market upward.
"Likelihood of melt up in risk assets into Jackson Hole growing ... likely followed by jump in yields," he wrote.
The chart below illustrates the rotation that Hartnett is noticing:
Essentially, a melt up by definition is a sudden leap in the market caused by investors rushing in because they fear missing out. It's not a sign of improved fundamentals.
In other words, these companies and markets may not have higher earnings or be stronger investment opportunities.
Hartnett doesn't go into the details of the end of the melt up, but the speech by Federal Reserve Chair Janet Yellen at the Jackson Hole conference at the end of the month appears to be the catalyst that will stop the stampede.
- A couple accidentally shipped their cat in an Amazon return package. It arrived safely 6 days later, hundreds of miles away.
- A centenarian who starts her day with gentle exercise and loves walks shares 5 longevity tips, including staying single
- 2 states where home prices are falling because there are too many houses and not enough buyers
- "To sit and talk in the box...!" Kohli's message to critics as RCB wrecks GT in IPL Match 45
- 7 Nutritious and flavourful tiffin ideas to pack for school
- India's e-commerce market set to skyrocket as the country's digital economy surges to USD 1 Trillion by 2030
- Top 5 places to visit near Rishikesh
- Indian economy remains in bright spot: Ministry of Finance