A research report released by a team led by senior strategist Michael Hartnett of Bank of America (
BAC) said that investors will continue to avoid riskier trades until the recent sharp rise in the US dollar shows signs of peaking. The Bloomberg Dollar Index has rebounded about 3% from its September low, reflecting that investors are reducing holdings of risk assets such as stocks and cryptocurrencies and rebuilding cash positions. At the same time, the yield on the US 10-year Treasury note, known as the “anchor of global asset pricing,” briefly touched 5.34% on October 1, the highest since 2002, before subsequently pulling back.
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He stressed that if small- and mid-cap stocks also join bank stocks in sharp declines, it would significantly indicate that market optimism about strong economic growth has peaked and would ultimately drag down technology stocks.
