"We’re in technical recession, but just don’t realize it"

Taking a fresh look at the so-called bear-market rally in U.S. stocks that took hold in late May was a team at Bank of America, led by Michael Hartnett, the chief investment strategist. The bank’s own bull and bear indicator is now deep in “contrarian bullish” territory — with credit also looking “deeply oversold,” noted Hartnett.

So why do investors keep selling those rips? The inflation shock isn’t over, as driven home by Friday’s data, an interest-rate shock is just taking shape, an economic-growth shock is looming, and there is “no release valve from a peak in yields,” while the bear-market rally itself is “too consensus,” in Hartnett’s view.

He rattled off a number of such spikes in prices since the start of the year — a 141% surge in natural-gas prices; gasoline up 91%; wheat, 39%; soybeans, 33%; and corn and cotton, 30% each.

“We’re in technical recession, but just don’t realize it,” said Hartnett, who notes ever murkier consumer data and household and consumer balance sheets indicating a shallow recession ahead. He added that “what can turn shallow into deep is the great unknown of the shadow banking system.”