Bank of America Hartnett: Sell US stocks on rallies, Buy the Dips in gold

Author: Zhang Yaqi

The market is shifting from “American exceptionalism” to “American denial”. Michael Hartnett, a global strategist at Bank of America, advises investors to sell U.S. stocks on rallies and buy international stocks and gold on dips.

In a research report released on the 24th, Hartnett stated that recent fund flows show an outflow of $800 million from U.S. stocks, while $3.3 billion flowed into gold. This indicates an increasing preference for gold in the market.

As the global economy rebalances, capital flows from the U.S. market to other regions, especially emerging markets and Europe. This trend in capital flows is supportive of gold prices. So far this year, gold has been the best performer (+26.2%), followed by government bonds (+5.6%) and investment-grade bonds (+3.9%). U.S. stocks fell 3.3%. U.S. household equity wealth has shrunk by about $6 trillion this year.

Hartnett suggests, “Stay BIG, sell rips,” which means to go long on Bonds, International Stocks, and Gold. Investors should sell on the rise during rebounds in the US stock market, rather than blindly chasing prices.

Hartnett: The market is at a historic turning point.

Hartnett stated that year-to-date performance of financial assets shows a clear trend: gold leads with (+26.2%), bonds perform well with (government bonds +5.6%, investment-grade bonds +3.9%), while U.S. stocks (-3.3%) and the dollar (-8.5%) have significantly declined.

Recent fund flows indicate that all regional stock markets recorded inflows of 3.4 billion USD in Europe, 1 billion USD in emerging markets, and 1 billion USD in Japan, while the US stock market recorded an outflow of 800 million USD; gold saw inflows of 3.3 billion USD.

Current trends indicate that the relationship between Wall Street and Main Street is being rebalanced. Data from Bank of America shows that U.S. household stock wealth has shrunk by about $6 trillion this year, and the ratio of private sector financial assets to GDP in the U.S. has decreased from over 6 times to 5.4 times.

Hartnett believes that this change marks the end of an era in which “we have never been so prosperous”—characterized by low interest rates, over $30 trillion in global policy stimulus, a 9% U.S. government deficit, and an AI boom.

Three key drivers of transformation

Hartnett believes that the current market correction is triggered by “3B” factors:

Bonds (: The yield on U.S. Treasury bonds saw the fastest increase of 50 basis points since May 2009.

Public Base): Trump’s approval rating dropped from 53% to 46%

Billionaires (: Tech giants have seen their market value evaporate by over $5 trillion.

To reverse the “sell the rally” trend, the market needs three factors:

Interest Rate Cut: The Federal Reserve’s interest rate cut expectation ) market anticipates a 65% chance of a rate cut at the FOMC meeting on June 18, and a 100% chance of a rate cut at the meeting on July 30 (

Tariffs: Trump’s tariff policy alleviates

Consumers: U.S. consumer spending remains resilient

Global Revaluation and the Weakness of the US Dollar

Hartnett stated that the major trend in 2025 is for stock and credit valuations to peak. Historically, the S&P 500 price-to-earnings ratio:

The average in the 20th century was 14 times ) World War, Cold War, Great Depression, and stagflation period (

In the 21st century, the average is 20 times ) during the period of globalization, technological progress, and loose monetary policy (.

In the first half of the 2020s, a 20-fold increase became the bottom line for the price-to-earnings ratio.

In the future, it may reach a price-to-earnings ratio cap of 20 times.

Hartnett believes that the continuous devaluation of dollar assets is the clearest investment theme, and the surge in gold prices is a clear signal of this trend. The trend of dollar devaluation will benefit commodities, emerging markets, and international assets ) Chinese technology, Europe/Japan banks (.