The risk of a hard landing for the US economy is rising, and it is recommended to sell stocks when the Federal Reserve cuts interest rates for the first time.
On August 2nd, Bank of America strategist Michael Hartnett stated that as the possibility of a more severe recession in the US increases, investors should sell stocks when the Federal Reserve makes its first rate cut. Hartnett pointed out that the ISM Manufacturing Index appears to be highly correlated with the direction of non-farm employment data. The only time the index remained in contraction territory for an extended period while non-farm employment maintained positive growth was from 1984 to 1986. At the same time, strategists said that the extent to which risk assets have already priced in the Federal Reserve's rate cuts by 2024 has reached its limit, with the S&P 500 index rising 32% in the past 9 months. In comparison, the average gain before the Federal Reserve's first rate cut was only 2% since 1970.
