Bank of America strategist Michael Hartnett said that the global financial market turmoil has not yet reached the level of suggesting concerns about an economic hard landing.
Although the S&P 500 index has fallen by about 6% since hitting a record high in mid-July, the index remains above its 200-day moving average of about 5050 points and the yield on U.S. 30-year Treasury bonds has not fallen below 4%.
"The Wall Street view of a shift from a soft landing to a hard landing has not yet been broken," Hartnett wrote in his report. He added, "Investor feedback is 'exhaustion,' but the expectation of a Fed rate cut means that market collapse has not ended the higher preference of investors for stocks over bonds.
Global markets have been volatile over the past month, with investors worried that the Fed's slow rate cuts may not be timely enough to prevent an economic slowdown. However, the S&P 500 rebounded after data released on Thursday showed that the labor market cooled slower than expected. The index has only fallen by 0.5% this week as of now.
This year, Hartnett has taken a more neutral stance on the stock market. He said that the next technical level worth watching for the Philadelphia Semiconductor Index and exchange-traded funds tracking large technology companies will be the 200-day moving average.
The strategist said that they are currently hovering above these levels, but if they fall again, it will mean that the next support level for the S&P 500 will be triggered at the 2021 high—meaning that the benchmark index will fall another 10%.