What followed was not a rally; it was a vertical repricing. Eleven days from washed out to overbought, the second fastest snapback since 1982.
Last week, we tipped the hat to Michael Hartnett for catching the turn almost to the day, a clean signal as Bank of America pulled down its Sell flag right into the late March lows. The kind of timing that doesn't whisper, it rings a bell across the tape.
What followed was not a rally; it was a vertical repricing. Eleven days from washed out to overbought, the second fastest snapback since 1982. The only time the market moved this quickly from despair to euphoria was when Paul Volcker slashed rates from 13%, a policy shock that rewired risk appetite overnight.
So the question into the latest Flow Show was simple, does Hartnett take a bow. Instead, he dims the lights. With the Nasdaq Composite ripping through a near record 13-day winning streak, the longest since 2009, tech via Technology Select Sector SPDR Fund (NYSE:XLK) pushing fresh highs while financials through Financial Select Sector SPDR Fund (NYSE:XLF) can't clear their 200-day, the move starts to look less like a breakout and more like a carefully dressed bull trap.
And yet the animal spirits are unmistakable. The Australian dollar ripping higher against the Japanese yen to levels not seen since 1990 is the market leaning hard into carry, into cyclicality, into risk. It is the kind of positioning that feels right, right up until it doesn't. This whole move has to be one of the biggest head-scratchers in memory.
More amusingly, Hartnett turns the lens on his own survey and basically shrugs. The April Bank of America Global Fund Manager Survey prints as the most bearish since June last year, yet the tape tells a completely different story, with 2026 tracking toward record inflows into equities and IG credit. It is the classic survey-versus-wallet disconnect. Managers talk defensively, allocate aggressively. Even Hartnett is now leaning into the trader's rulebook, watch the flow not the forecast. Slightly awkward when you are the one asking the questions.
And the flows last week read like a full risk reallocation rather than a cautious nibble. $11.3bn into equities, $7.9bn into bonds, with $1.2bn each into gold and crypto, all funded by a historic $172.2bn exodus from cash. That is not rotation, that is deployment. The kind of move where cash stops being a position and becomes fuel, and once it starts burning, it tends to run hotter than expected.
How is the street reading the vertical bull run charge? The split is stark. On one side, the bears are holding the line. According to Bank of America, the macro crowd insists you do not chase risk until inflation has clearly peaked, and right now that peak is nowhere in sight. If anything, Q2 looks like a reheating phase, with oil firming, CPI pushing higher, and yields following, a mix that has a habit of ending in another bond tantrum, echoing the playbooks of 2013, 2015, 2022, and 2023.
...driven by a cocktail the market rarely digests cleanly, a labour market that refuses to cool, a geopolitically pressured dollar losing some of its defensive bid, and growing expectations that Kevin Warsh would lean dovish early. History adds a twist here; in the first three months of the last seven Fed chair transitions, yields have risen by roughly 50 basis points on average—a reminder that policy pivots do not always land the way markets expect.
On the other side, the bulls are keeping it simple. As long as yields and unemployment stay anchored in that 4 to 5 percent zone, the system holds and risk can keep grinding higher. With earnings for the S&P 500 tracking north of $330, they see the rally not as excess but as earnings catching up to price.
Just as importantly, the hierarchy has not changed. In this cycle, equities still sit above bonds. Policymakers are leaning into strong nominal growth to keep the electorate steady, and both the QE generation and Gen Z have been conditioned to treat the stock market as something that will always be backstopped—something simply too embedded to be allowed to fail.
So, where does Hartnett land? Strip away the dry humour in his Zeitgeist line about regulators potentially easing day trading rules, and the message is clear. The system is still being nudged toward risk—one last extension powered by retail participation if needed. And as the Bank of America strategist closes out his note, he lays down a roadmap that speaks less to celebration and more to what comes next.
How is the BofA Investment strategist trading it?
It lines up with my own read. Rate expectations have already swung from pricing 125bps of cuts to flirting with hikes and back again, now sitting around a token 5bps easing. That arc still feels too high. The path of least resistance is for those expectations to grind lower as the cycle matures and growth anxiety starts to outweigh inflation fear.
This war will pass; they always do; but the bigger trade is already forming underneath. The dollar never really rallied the way it should have during the crisis, and the case for fading it is building. Tariffs, NATO friction, and the slow unwind of petrodollar recycling are all chipping away at structural demand. Foreigners are already sitting on massive exposure to US assets, and the appetite to keep adding into a $39 trillion debt pile with a $1.2 trillion annual servicing cost is starting to thin.
At the same time, policy pressure is shifting. The Fed is being nudged toward easing, not tightening, and that creates a simple choice for policymakers: allow yields to spike and risk breaking things or let the currency absorb the adjustment. History tells you which path they prefer. In that world, the dollar does not collapse; it leaks lower, and that is where the opportunity sits.
So yes, this conflict will end, but when it does, the cleaner trade is likely not chasing relief rallies in risk; it is leaning into dollar shorts as the macro tide quietly turns.
Lean into commodities. The pecking order is shifting; commodities first, then equities—with bonds trailing behind—in a world where inflation risk refuses to fully die. For allocators, commodities are doing triple duty: they hedge risk; they hedge inflation; and they hedge a weakening US dollar all at once.
And the geopolitical layer only reinforces it. This is no longer just about pricing cycles; it is about control. The race now is over who owns the inputs—energy, metals, rare earths—the raw materials that power the next phase of growth. In that world, commodities are not just an allocation; they are leverage on the new global order., or as Hartnett put it: "who owns the chips, rare earths, minerals, oil,wins the AI war."
Lean into China. The early winners of the AI race have been clear: US semis; Asia tech; and the resource corridors feeding them—but the catch up trade is now kicking in. China tech has started to move with intent; and the ChiNext Index breaking out is the market signalling that this leg is no longer lagging; it is joining the run.
This used to be one of my cleaner tells for stepping into yen longs when the stretch got too extreme. With the Chinese yuan pushing to multi-decade highs against the Japanese yen, and similarly extended versus the South Korean won, the setup starts to look crowded. China has the energy tailwind (alternative energy and cheap Russian oil) to keep its machine running, but such dislocations rarely last forever.
The key is timing the turn. When the war premium fades, and the macro shifts back toward rates and growth, that stretched relationship has a habit of snapping back, and that is where the yen trade comes back into play. Not for now, but one to keep in the pocket when the regime flips.
This one was not on my radar, but it is worth flagging. The US consumer discretionary complex is sitting at relative levels last seen during the Lehman Brothers collapse and the COVID-19 market crash, while globally the sector is trading at multi-year lows versus energy. That tells you the consumer has already priced in a heavy dose of stagflation, arguably more than any other part of the market.
That is why Hartnett leans into it as a contrarian long. If the post-war pivot shifts toward affordability and political pressure forces support back toward households, this is where the rebound lives. It is also a clean hedge on a broader shift in the policy regime, where the pendulum starts swinging away from market-first thinking toward something more redistributive as the decade rolls on. Or, as Harnett framed it: from "populist capitalism" to "populist socialism".