Hartnett Unveils The Two Numbers That Trigger A Risk-Off Deleveraging Cascade

At the end of August, BofA’s Michael Hartnett told us contrarians were waiting for two coming events to flip risk-off: a US-Iran capitulation that delivers the last leg down in oil, and a midterm vote in which Main Street picks “affordability” over higher stock prices. Four weeks later, one Fed hike and a whopping 60bps move higher in 10Y yields which has sent them to 19-year highs, the BofA CIO has added a twist: an Iran deal may not be the all-clear after all, because if oil drops another $10 and yields keep rising, that’s when the real risk-off begins.

In his latest Flow Show, titled “China in a Bull Shop” (available to pro subscribers in the usual place), Hartnett starts with his weekly scoreboard. Obviously, it’s been a great year for oil, a fine one for stocks, and a miserable one for anyone who took “bonds are a hedge” literally (and, remarkably, after a catastrophic plunge in the spring, bitcoin has erased almost all of its YTD losses):

The Biggest Picture