BofA's Hartnett: Sell U.S. stocks on strength, buy gold on weakness
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BofA's Hartnett: Sell U.S. stocks on strength, buy gold on weakness
Hartnett remains firmly bullish on gold, driven by expectations of continued depreciation of the dollar, heightened market uncertainty, and increased demand for safe-haven assets.
Navigating Web3 tides with focused insightsAuthor: Zhang Yaqi
The market is shifting from "American exceptionalism" to "American rejection," and Bank of America global strategist Michael Hartnett advises investors to sell U.S. stocks on rallies while buying international equities and gold on dips.
In a research report released on the 24th, Hartnett noted that recent fund flows show $8 billion exiting U.S. equities versus $33 billion flowing into gold, indicating rising investor preference for the precious metal.
As the global economy rebalances, capital is moving out of the U.S. market and into other regions—especially emerging markets and Europe. This trend supports gold prices. So far this year, gold has performed best (+26.2%), followed by government bonds (+5.6%) and investment-grade bonds (+3.9%), while U.S. equities are down 3.3%. American households' stock wealth has already shrunk by approximately $6 trillion this year.
Hartnett recommends "Stay BIG, sell rips"—meaning overweight Bonds, International Stocks, and Gold. Investors should take profits during U.S. equity rebounds rather than blindly chasing rallies.
Hartnett: The market is at a historic turning point
Hartnett said financial assets year-to-date have shown a clear pattern: gold leading gains (+26.2%), bonds performing well (government bonds +5.6%, investment-grade bonds +3.9%), while U.S. stocks (-3.3%) and the dollar (-8.5%) have declined significantly.
Recent fund flows reveal inflows across all regional equity markets (Europe: $34 billion, emerging markets: $10 billion, Japan: $10 billion), except for U.S. equities, which saw an $8 billion outflow; meanwhile, gold attracted $33 billion in inflows.
This trend suggests a rebalancing between Wall Street and Main Street. According to BofA data, U.S. household stock wealth has contracted by about $6 trillion this year, and the ratio of private sector financial assets to GDP has dropped from over 6x to 5.4x.
Hartnett believes this shift marks the end of an era—"the never before so prosperous" period characterized by low interest rates, over $30 trillion in global policy stimulus, a 9% U.S. fiscal deficit, and AI-driven growth—which is now coming to a close.
Three key drivers of change
Hartnett says the current market correction was triggered by three "3B" factors:
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Bonds: U.S. Treasury yields rose by 50 basis points at the fastest pace since May 2009
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Base: Trump’s approval rating fell from 53% to 46%
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Billionaires: Tech giants lost more than $5 trillion in market value
To reverse the "sell the rip" trend, the market needs three developments:
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Rate cuts: Fed rate cut expectations (market pricing 65% chance at the June 18 FOMC meeting, 100% by the July 30 meeting)
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Tariffs: Easing of Trump's tariff policies
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Consumers: Resilient U.S. consumer spending
Global revaluation and a weak dollar
Hartnett says the major trend in 2025 is that valuations for equities and credit are peaking. Historically, the S&P 500 P/E ratio:
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Averaged 14x in the 20th century (periods of world wars, Cold War, Great Depression, stagflation)
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Averaged 20x in the 21st century (era of globalization, technological advancement, and loose monetary policy)
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In the first half of the 2020s, 20x became the valuation floor
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Going forward, 20x could become the valuation ceiling
Hartnett believes the ongoing devaluation of dollar-denominated assets is the clearest investment theme, with surging gold prices serving as a clear signal. A weaker dollar will benefit commodities, emerging markets, and international assets (Chinese tech, European/Japanese banks).
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