BOA: The Three Trades We Like Best For An S&P 500 Rally

S&P 500 Rally

Last week, Bank of America published a research report detailing the three trades its chief investment strategist, Michael Hartnett and team like in the current environment. The report  details the three investment calls which are illustrated by 12 charts. Two of the three calls are based on existing investment strategies already detailed in BoA notes, including the “Icarus Trade” and “Davos Man portfolio to Joe Six-Pack portfolio.”

The three calls essentially blend into one. Overall, they are a bullish call on equities. Year-to-date market price action is pro-risk and pro-cyclical. Global equity is up 4.8% year-to-date, bonds are up 0.2% year-to-date, and the dollar is down 0.9% year-to-date.

BOA: The Three Trades We Like Best For An S&P 500 Rally

Hartnett and team expect this trend to continue. They believe their so-called Icarus Trade (a 10% melt-up this quarter before a meltdown later in 2017) is still on the table as the bank’s key Bull/Bear ratio stands at only 6.3, two points off the “Greed” level of eight. A market top Hartnett believes will most likely coincide with “peak macro” data. US ISM index (this remains single best indicator of profit cycle) above 58 would be the first sign that investors should "fade the euphoria" as best of global EPS growth revisions would likely have already occurred.