BofA's Hartnett Warns Bull-Bear Indicator Hits 8.8 as CPI Surges to 4.2%, Recommends Defensive Positioning

According to Bank of America strategist Michael Hartnett's latest research, the Bull & Bear Indicator has surged to an extreme level of 8.8 following the release of U.S. CPI data hitting 4.2%, marking the fourth consecutive week of sell signals. Historically, such signals have predicted average 2-3% losses over the subsequent 2-3 months with nearly 60% accuracy. Hartnett warns that despite strong tech stock inflows of $12.3 billion last week, an underlying market divergence signals elevated risk as CPI exceeds the 4.3% unemployment rate—a rare phenomenon historically preceding severe market corrections.

Hartnett recommends investors maintain defensive positioning through the July 29 FOMC meeting as Fed policy shifts toward tightening. He suggests rotating away from overheated tech stocks toward dividend-paying equities, REITs, gold, cryptocurrencies, and emerging markets like India and Indonesia, while awaiting market valuations to normalize.