Sell stocks into strength on any COVID-19 vaccine news as 2021 turns into a bear market, BofA says
Peak positioning, peak policy, and peak profits are three reasons why investors should sell their stocks into strength on any COVID-19 news in the coming months, Bank of America said on Friday.
The bank likened today's scenario to 2018, when US tax cuts caused a temporary peak in investor positioning, fiscal policy, and corporate profits in the first half of that year.
"We are sellers-into-strength into vaccine [rollout] in coming months," it said.
Despite the negative outlook, BofA does see opportunity in the cyclical trade tied to the reopening of the economy, according to the note.
Developments tied to the distribution and administration of COVID-19 vaccines will likely be viewed as a "sell the news" event that investors should take advantage of, Bank of America said in a note on Friday.
The bank foresees a similar scenario to 2018 playing out, as investors rush to buy stocks on positive news related to vaccines and the highly anticipated reopening of the economy. But that rush to buy stocks could represent a period of peak investor positioning, peak fiscal policy, and peak corporate profits, according to BofA.
In early 2018, shortly after the passage of President Trump's tax cuts, stocks meandered sideways for the better half of a year as investors struggled to identify a catalyst to push stocks even higher. This coincided with record stock inflows.
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