(Bloomberg) — Optimists expecting the stock market to weather the rate-hike cycle as they’ve done in the past are missing one important detail, according to Bank of America Corp.’s strategists.
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While U.S. equities saw positive returns during previous periods of rate increases, the key risk this time round is that the Federal Reserve will be “tightening into an overvalued market,” the strategists led by Savita Subramanian wrote in a note.
“The S&P 500 is more expensive ahead of the first rate hike than any other cycle besides 1999-00,” they said.
U.S. and European stocks have made a rocky start to 2022 amid concerns that more aggressive monetary steps to tame inflation will hamper the recovery. While a positive earnings season is easing some worries over a less forgiving macroeconomic backdrop, equity markets have remained volatile, and strategists…
