Bank of America Merrill Lynch: Now is the time for short on the US market

According to Michael Hartnet, Fed members are ready to start lowering their QE program, which in turn will lead to a fall in stock markets. The BofA Merrill Lynch strategist believes that this is necessary to slow the development of the US stock market. While the SP500 rose 12% since the beginning of the year, Fed bonds rose by only 1.4%. According to Hartnet, if the Fed takes a step-by-step push of the quantitative easing program, the negative impact on the stock market will be limited.

It is clear from the graph that after the crisis in 2007-2008 by the end of 2016, US stocks are moving in sync with the securities held by the Fed. Taking into account the strong correlation and intentions of the Fed to reduce the program of quantitative easing, now is the time when the SP500 will begin to decline.

Later this week, on Wednesday, the Fed will decide on the size of the basic interest rate and how it will reduce its balance. If there is a sharp change in monetary policy, it is very likely that we will see a correction for US indices. Traders and investors will closely monitor the Fed's decision, and then increased volatility is possible.

Source: Bloomberg Pro Terminal

Young trader Peter Milanov

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