March 3, 2026
Here’s the new pain trade, and it involves rates, tech stocks and the Japanese yen, says Bank of America

Here’s the new pain trade, and it involves rates, tech stocks and the Japanese yen, says Bank of America

Here’s the new pain trade in markets, according to Bank of America – MarketWatch

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The Tell

Last Updated: July 7, 2023 at 9:33 a.m. ET First Published: July 7, 2023 at 8:21 a.m. ET

Some traders could get hurt.

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[]What combination of market moves could rattle investors?

[]According to Bank of America strategists led by Michael Hartnett, the new pain trade, so to speak, would be lower bond yields with a lower Nasdaq and a stronger Japanese yen.

[]“Every billionaire minting same long T-bills, long Nasdaq barbell…biggest Q3 pain trade is lower yields, lower Nasdaq, plus higher yen…no one has that on,” the strategists say in their weekly flow show commentary.

[]No carry trade, they say, is bigger than long the Mexican peso against the Japanese yen MXNJPY, -0.80%. This year the Mexican currency has vaulted 23% against its Japanese counterpart. A carry trade involves borrowing in a low interest-rate currency to fund an investment at a higher rate.

[]The Nasdaq COMP, -0.13% also has seen meteoric gains this year, with the Nasdaq Composite jumping 31% so far. Techs have weathered higher rates from the artificial-intelligence speculative frenzy, though they do to tend to react to changes in the interest rate environment. Tech stocks have led gains for the S&P 500 SPX, -0.29%, up 14.9% year-to-date, while the Dow Jones Industrial Average DJIA, -0.55% lags behind, up 2.4%.

[]Hartnett and team say AI remains a narrative based on speculative numbers, albeit impressive ones given ChatGPT usage. They say a “sell the last hike” by the Fed move will hit tech the hardest, but “if AI and Magnificent 7 can shrug off new rates-shock then ‘baby bubble’ set to mature into something bigger in the second half.”

[]The Magnificent Seven refers to Apple AAPL, -0.59%, Nvidia NVDA, +0.95%, Meta Platforms META, -0.50%, Tesla TSLA, -0.76%, Amazon.com AMZN, +1.11%, Microsoft MSFT, -1.19% and Alphabet GOOGL, -0.52%.

Barron’s: Rivian, Tesla, Alibaba, Levi Strauss, First Solar, and More Stock Market Movers

[]Analysts boosted their price targets on Rivian and Tesla, Alibaba stock rose after Chinese authorities fine Ant Group—a fintech company of which Alibaba owns a third—almost $1 billion, and Levi Strauss cut its fiscal-year outlook.

[]Steven Goldstein is based in London and responsible for MarketWatch’s coverage of financial markets in Europe, with a particular focus on global macro and commodities. Previously, he was Washington bureau chief, directing MarketWatch’s economic, political and regulatory coverage. Follow Steve on Twitter: @MKTWgoldstein.

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