Bank of America strategist Michael Hartnett wrote that investors will probably reload long positions or rotate into other bullish trades instead of abandoning risk assets, provided two specific technical benchmarks hold.
Hartnett singled out the Roundhill Magnificent Seven ETF remaining above its 200-day moving average around $65, and AUD/JPY preserving support at 110, as the conditions that would keep investors inclined to buy dips. In his note, he framed those levels as the line between rotation and retreat in market behavior.
He acknowledged that tighter financial conditions are removing leverage from markets and that speculative excess has already been pared back in some areas - for example, Korean small-cap technology stocks, which have fallen 36% over the past eight weeks. Hartnett described those moves as rotation activity rather than wholesale withdrawal from risk assets.
Hartnett used the term "no consensus" to summarize the macro backdrop driving investor complacency in the first half of the year - specifically, no landing, no Fed hike, no AI capital-expenditure pullback, and no Democratic sweep in the midterms. That constellation, he wrote, helps explain why bearish positioning has been limited so far.
"Can’t buy bonds, can’t sell stocks," he noted, summarizing what he sees as the prevailing investor strategy of favoring anything but bonds. In the same context, he pointed out the rare concurrence of U.S. CPI at 4.2% and the unemployment rate at 4.2%, an unusual pairing that historically has coincided with periods preceding Fed tightening - a pattern market participants may not recall well.
Hartnett also revisited a presidential-cycle framework, observing that the current trajectory of the Trump administration could lead to just the fourth presidency since 1873 to produce four consecutive years of stock gains. He argued that this prospect makes the midterm elections "the most binary Wall Street event" for the second half of the year.
Recent flows show substantial allocations into equities and cash alongside bond purchases. Over the past week, $56.4 billion went into stocks - the fourth-largest weekly inflow of the year - while $39.5 billion flowed into cash, helping push money market fund assets to a record $7.9 trillion. Bonds received $31.3 billion in the same period.
Within equities, the technology sector attracted $18.8 billion, putting it on a pace for a record $183 billion of inflows for 2026. China equities drew $9 billion, marking their largest inflow since December. Meanwhile, BofA's Bull & Bear Indicator stood at 9.5, an extreme-bullish reading that the bank labels a "sell signal."
Implications and positioning
Hartnett's framing suggests investors are managing risk through rotation across risk assets and cash rather than through a broad exit. The two technical thresholds he emphasized - the MAGS 200-day average near $65 and AUD/JPY support at 110 - are presented as practical signals that would sustain a buy-the-dip approach.
At the same time, he cautioned indirectly that tighter financial conditions have already forced deleveraging in speculative pockets, showing how fragile extended risk appetites can be even while headline flows remain positive.
Data points and market signals in Hartnett's note were cited as presented by the strategist; the note did not introduce additional forecasts or outcomes beyond the indicators and flow figures summarized above.