"This Is Everyone's New Favorite Theme": Hartnett Says Dollar Has Begun Its 4th Bear Market Of The Past 50 Years

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by Tyler Durden
Monday, Apr 17, 2023 - 02:02 AM

Back in October 2022, just as the dollar was hitting what according to some measures of FX strength was an all time high, BofA's Michael Hartnett laid out his two top trade for 2023 which was summarized by the following symbolic pair: "buy EM humiliation, sell US hubris", or said otherwise, buy EMs, short the USD.

Almost exactly half a year later, it appears that Hartnett's trade is starting to really pay off, and as the BofA Chief Investment Strategist writes in his latest Flow Show note titled "Sugar Coated Iceberg" (available to pro subscribers in the usual place), he writes that after a year year of tremendous ascent, the latest age of the strong USD is over, and suddenly "everyone’s new favorite theme…US dollar debasement; US$ -11% since Sept, gold >$2k, bitcoin >$30k; right secular theme (deficits, debt, geopolitics)." So as the US dollar enters its "4th bear market of past 50 years" this is "bullish gold, oil, Euro, international stocks"... but pessimism so high right now, and 200bps in Fed cuts are already priced in from June to the election, so Hartnett's tactical advice is to look for a US$ trading bounce after Fed ends hiking cycle May 3rd, before going fully short the greenback.