Hartnett’s latest note is built around a Dickens-style market: the best of times and the worst of times living inside the same index.
On one side, AI, Mag 7 and biotech are still trading as though the boom can outrun the bond market. On the other, tighter financial conditions are crushing breadth, long-duration assets are being punished and the cost of money keeps moving in the wrong direction. That split is the whole point of his Tail of Two Cities.
It also explains why his bond call has become more aggressive. Last week Hartnett was only telling clients to “nibble” at duration. Since then, the 10-year has climbed to 5.33%, Brent has pushed back above $100 and the punishment in bonds has deepened. Rather than backing away, he has leaned further into the pain and now says to “buy humiliation.”
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Hartnett is turning contrarian on bonds. With long-run Treasury returns at their worst in a century and positioning heavily skewed against duration, his message has moved from “nibble” to “buy humiliation.”
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The market is still split in two. AI, Mag 7 and biotech continue to defy higher rates, while breadth deteriorates and more of the market trades like “artificial irrelevance.”
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His big historical frame is the railroad boom. AI concentration and capex still have room to run, but the warning from the 1870s is that credit stress, liquidity loss and the cost of money—not valuation alone—are what finally break a capex mania.
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The policy put is still part of the trade. Hartnett expects buybacks, possible yield-curve control and other intervention to cap the damage if the long end threatens the AI boom and the broader market. Pasted text
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Positioning is already starting to shift. Long-duration bonds just took in their biggest inflow since May 2025, while BofA private clients are simultaneously sitting at record-high equity exposure and record-low cash. Pasted text
Dark Side of the Boom™: Stocks are still pricing the boom. Bonds are already pricing the financing pain. Hartnett’s bet is that the humiliation trade in duration gets paid before the AI railroad runs out of track.