BofA Bull/Bear Indicator Surges to 9.6 as Hartnett Urges Shift From Risk Assets to Defensive Plays

According to Bank of America chief strategist Michael Hartnett on July 19, the bank's proprietary bull/bear indicator surged to 9.6, reaching a historic extreme level. Hartnett attributed investor optimism to four core assumptions: no economic hard landing, no Fed rate hikes, no AI capital expenditure cuts, and no Democratic sweep in midterm elections. Latest fund flows validated extreme market euphoria, with U.S. equities recording $55.8 billion in net inflows while money market funds saw a massive $119.6 billion weekly outflow, the largest cash exodus since April 2026; technology stocks accumulated $48.8 billion in three-week inflows, a record high.

Hartnett recommended withdrawing from risk assets and rotating into long-duration Treasury bonds, defensive sectors, high-dividend stocks, and the U.S. dollar. He flagged the Magnificent Seven ETF (MAGS) as a critical indicator: a break below $65 could pressure cyclical sectors broadly, while a break above $70 could signal a re-entry opportunity. The key tail risk involves mega-cap tech firms cutting AI capital spending without driving new highs, potentially triggering sharp losses across growth assets and catalyzing widespread short positions in banks, brokers, and industrials.