Bank of America: risks of economic slowdown are growing

Bank of America analysts are urging investors to sell shares at the first interest rate cut by the US Federal Reserve, fearing a serious economic downturn. In their weekly analysis, they highlighted the growing risks of a significant slowdown in the economy, despite expectations of a mild slowdown or lack thereof. 

Experts draw attention to the historical relationship between the ISM Manufacturing index and the number of jobs, noting that the only long period when the index indicated a contraction in the economy, and the number of jobs remained positive, was the period from 1984 to 1986. 

The latest data on the decline in manufacturing activity in the United States reinforces these concerns. 

In anticipation of the Fed's rate cut, assets considered risky have already risen significantly in price. The S&P 500 index has risen 32% over the past nine months, in stark contrast to the usual 2% increase in previous periods of rate cuts. 

Investors actively invested $14.6 billion in bond funds and $8.9 billion in equity funds over the week, according to EPFR Global data. Gold attracted $0.8 billion, and 12.5 billion was withdrawn from cash funds. Cryptocurrency funds lost $0.4 billion. The technology sector has led the way in terms of investment inflows over the past six weeks, receiving $3.6 billion.

However, the drop in the S&P 500 and Nasdaq 100 indices on Thursday by 1.3% and 2.4%, respectively, indicates growing concerns about the strength of the American economy.