This is a 'textbook' bear market bounce that will fail, Bank of America says

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A new era 'of higher inflation' means to tilt holdings toward cash and commodities, strategist Hartnett writes

Investors better have enjoyed the summer stock market rally while it lasted, because it's almost over, according to Bank of America's Michael Hartnett. A move that has taken the S & P 500 up about 17.4% since hitting the June lows, has been a "classic bear really, and ultimately [a] self-defeating rally," the bank's chief investment strategist said in a client note Thursday. "Everyone is bearish but no one has sold stocks," Hartnett added.

Hartnett also expects Federal Reserve policy to play a role in thwarting the market's push higher. The central bank this year already has increased its benchmark interest rate 2.25 percentage points and is expected to keep moving higher. However, market participants have been hoping that recent comments from Fed officials indicate that at least the magnitude of the rate hikes will abate soon. "Very few fear Fed ," Hartnett wrote.

 

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