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Business Insider: A Dot-com Style Unwind is Coming - Investors Should Sell Now Before the Looming Crash, Bank of America Says

December 13, 2021
Market Crash Coming

Article by Matthew Fox in Business Insider

The stock market's recovery rally over the past week represents an opportunity for investors to sell ahead of an upcoming Fed interest rate "shock," Bank of America's Michael Hartnett said in a Friday note.

Hartnett recommends investors "sell the rip" rather than "buy the dip" in stocks as interest rate hikes are about to rock Wall Street, and amid a strikingly similar unwind in tech stocks compared to the dot-com bubble in 2000.

If Hartnett's Fed rate hike expectations pan out, that would likely be a shock to Wall Street, with most market participants expecting the Fed to start with a 0.25% rate hike in the second half of 2022. "The lead indicator (yield curve) all say 'Fed coming', but investment grade bonds and FAANG do not," Hartnett said. 

"The bubble in speculative froth has popped," Hartnett said, highlighting that the ongoing breakdown in Ark Invest's Disruptive Innovation fund is closely tracking the descent of Invesco during the 2000 dot-com unwind.

Finally, investors shouldn't get too excited about short-term rallies in the stock market after big sell-offs, as they tend to serve as head fakes to bullish investors during a declining market.

According to Hartnett's analysis, the Nasdaq staged 11 "dead cat bounces" with rallies as high as 45% between April 2000 and August 2002, well before the stock market bottomed in October 2002. 

Since the Nasdaq fell .......

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