Economic Outlook - The current economic situation is characterized by two significant bubbles: one in non-bank financial credit, which is nearly four times the annual GDP in the United States, and another in the AI sector, where the capital inflow in the U.S. compared to China appears excessive [1][2] - The bursting of these bubbles could have serious economic consequences, particularly affecting credit transmission, which is crucial for economic stability [2][6] Comparison to Historical Events - The potential economic fallout from the current situation is not expected to mirror the 1929 crash due to differences in policy responses; unlike in 1929, where budgets were tightened and trade tariffs were imposed, current policies are likely to ease in response to a bubble burst [5][6] - The situation is more comparable to the housing bubble burst in 2008, which had significant repercussions for credit and the real economy, rather than the isolated impact of the dotcom bubble [6][7] Investment Strategy - The investment strategy should focus on wealth protection, emphasizing hard assets such as gold, oil, and strategic metals, while being generally negative on equities, except for defense stocks that may benefit from geopolitical tensions [8][9] - There is a negative outlook on bonds due to anticipated higher deficits and concerns over the sustainability of sovereign debt in the U.S., Europe, and Japan [10]

In his weekly Flow Show update, Bank of America chief strategist Michael Hartnett remains reluctant to call a top in markets ...