BofA's Doomsday Prediction: The Fed’s 2021 Policy Of "Rhetorical YCC" To Support Stocks "Ultimately Fails"

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by Tyler Durden
Saturday, May 01, 2021 - 09:11 AM

Bank of America's Chief Investment Strategist Michael Hartnett has long warned that the current, unprecedented experiment in monetary central planning will lead to a catastrophic bad ending, most recently two months ago when during the recent yield melt up he said that "The Fed Will Inevitably Move To YCC" As "Rates Are No Longer Anchored."

And while the turmoil in the bond market has subsided in the past 8 weeks, the inflation that surging bond yields telegraphed was coming has arrived, and as Hartnett writes in his latest Flow Show note published overnight, "lumber, copper, steel, iron ore, tin, corn, soybeans, at or close to all time highs", a fact we have repeatedly demonstrated in recent days.

In fact, as Hartnett notes, the "Trade of '21" - if one is limited to conventional assets and not cryptos such as bitcoin or better yet, ethereum - is long copper (+27.9%), short 30-year Treasury (-13.8%); with Hartnett pointing out that the annualized 10-yr return from commodities has turned positive (just barely at +0.8%) for the first time since Nov14; to be sure, there is much more upside to come if one compares this return with the 10-yr return from stocks 14.2%, government bonds 6.4%, and corporate bonds 5.5%.