---
title: "Bank of America's \"Big Turn\": Bullish on commodities, bearish on US Treasuries, key data next week"
type: "News"
locale: "zh-HK"
url: "https://longbridge.com/zh-HK/news/213140662.md"
description: "Bank of America stated that if the U.S. ISM Manufacturing Index is greater than 49, it may push the 30-year bond yield above 4.3%; factors such as globalization, low debt, demographic structure, and technology reversing low inflation will bring inflation back to the 5% level, indicating that the bull market for commodities has just begun"
datetime: "2024-09-01T11:55:32.000Z"
locales:
  - [zh-CN](https://longbridge.com/zh-CN/news/213140662.md)
  - [en](https://longbridge.com/en/news/213140662.md)
  - [zh-HK](https://longbridge.com/zh-HK/news/213140662.md)
---

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# Bank of America's "Big Turn": Bullish on commodities, bearish on US Treasuries, key data next week

When the market plummeted at the beginning of August, Bank of America warned to pay attention to key support levels. Now, with the Fed about to start cutting interest rates, Bank of America believes that US bonds may face a decline, and the bull market in commodities is just beginning.

Renowned strategist Michael Hartnett from Bank of America commented in his latest Flow Show note that he sees an opportunity to re-enter long-term bond trading, especially if the ISM Manufacturing Index is above 49, which could push the 30-year bond yield above 4.3%.

Furthermore, Hartnett sees a bigger opportunity than the bond market. He believes that in the 20th century, the average inflation rate was 5%, but due to rare factors such as globalization, low debt, demographic structure, and technological disruption, inflation has dropped to 2%. Now, with these factors reversing, the bull market in commodities is just beginning.

## Reversal of the US Bond uptrend

**Hartnett elaborated on why he expects the "rapid reversal of the bond frenzy of the past 4 months," with the 30-year US Treasury yield dropping from 4.75% to 4.0%:**

> -   **Seasonality:** September is usually the second largest month for corporate bond supply, averaging $135 billion over the past 4 years. FMS cash levels are low at 4.3%, and there is a surge in $180 billion of government bond supply.
> -   **Geopolitics:** Conflicts and protectionism have pushed up energy prices, with European natural gas rising 70% since February.
> -   **Positioning:** The 30-year US Treasury has shifted from "oversold" in the first quarter to "overbought" today, with FMS investors turning net OW bonds for the first time since March 2024.
> -   **Extreme ahead of the Fed:** The market expects a 200 basis point rate cut in the next 12 months. Despite the "V-shaped" recovery of risk assets, the Fed remains as optimistic as possible, and the rate cut is fully reflected in prices.

> 
As Hartnett pointed out, paying attention to US hiring, when the private sector's share of total wage growth fell below 40% in the past 6 instances, a recession followed. This is because the "government and its friends" (education and healthcare) dominate the labor market against productivity, and "long-term bonds" once again become the best "hard landing" hedge tool.

## The bull market in commodities is just beginning

**In addition to long-term bonds, Hartnett believes that a bigger opportunity may be emerging as the bull market in commodities is just beginning:**

> As described by Hartnett, the shift from a "2% to 5% world," the average inflation rate in the 20th century was 5%. It was only due to the rare combination of factors such as globalization, low debt, demographic structure, and technological disruption that brought 20 years of 2% CPI. However, the reversal of these forces currently implies a structural shift back to 5% inflation
> 
> 
Hartnett further pointed out:

> **Although most commodities currently seem to be in a long-term bear market, this situation is about to change because the long-term commodity bull market of the 2020s has just begun, with an annualized return of 11%. Debt, deficits, demographics, deglobalization, artificial intelligence, and net zero policies will all lead to inflation.**
> 
> This means that in the 2020s, commodities will outperform bonds in a 60/40 balanced investment portfolio, as the total return over the past 4 years has shown: the 30-year US Treasury bond yield was -39%, while the commodity yield was +116%; even in the case of declining inflation, the annualized return of the commodity index can reach 10-14%, while the dovish Fed's return is only +6%

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