Pressure in the bond market is also taking a toll on stocks, which are likely to go even lower from here, according to Bank of America’s chief strategist. Normally, investors look for the safe harbor of fixed income when stocks are down. This means a rise in bond prices and a corresponding drop in yields. However, with central banks rapidly raising rates to control inflation, fears of a recession are rising and all assets are toxic for investors these days. U.S. Treasury yields rose again on Friday, with the two-year note most sensitive to a Federal Reserve rate hike jumping 7.4 basis points to 4.2% by midday ET. “Inflation/rates/recession shocks are not over, plus the fall in bonds in recent weeks means the highs in credit spreads, the lows in stocks are not yet,” Michael Hartnett, chief investment strategist at Bank of America, wrote in his weekly note analyzing the situation. the flow of money through markets. As consumer and producer prices rise and the Federal Reserve and its global counterparts respond, “the new regime of higher inflation means the secular view remains cash, commodities and volatility to outperform bonds and stocks,” he added. On Friday, the stock market was on track for another losing week after a mid-summer rally. The S & P 500 fell more than 4.5%, while the Nasdaq 100, whose tilt toward technology stocks makes it particularly vulnerable to higher rates, also fell more than 4%. Bank of America’s leading sentiment indicator is “deeply bearish,” Hartnett wrote, though that still hasn’t translated into a contrarian buy point. As a prescription for when investors can find opportunities, Hartnett offers, “Bite at 3600 SPX, bite at 3300, gorge at 3000.” That would translate into respective S&P 500 losses from Thursday’s close of 4.2%, 12.2% and 20.2%. The index has already lost more than 22% this calendar year. The cautionary note comes as other Wall Street houses also lower expectations. Goldman Sachs cut its target for the S&P 500 to 3,600 on Thursday, warning that the situation could worsen if the Fed’s rate hikes result in a “hard landing” for the economy. In that case, Goldman says the index could fall 16% from current levels. Hartnett indicated that political uncertainty remains a problem. As central banks tighten, fiscal authorities in the US, UK and elsewhere continue to provide stimulus, offsetting the benefits of higher inflation-fighting rates. “Investors want policy coordination and policy credibility, and until they get that, they’re likely to struggle,” Hartnett said.