Michael HartnettChief investment strategist at Bank of America, predicted the start of a bear market for the US dollar and forecast a 20% loss US dollar index (DXY).

According to Hartnett’s recent The Flow Show, markets are entering a new phase of conflict, geopolitical lockdown, populism, tax excesses, government intervention, regulation and redistribution. These factors will lead to a world of 3% to 4% inflation and 3% to 4% interest rates.

In the long term, the strategist expects the US currency to depreciate by 20 percent and a maximum of 3-4% annual gains from loans and stocks. We remain “patient bears in a world of impatient bears,” according to the expert.

The largest exchange traded fund tracking the US Dollar Index is the Invesco DB US Dollar Index Bullish Fund UUP, which is down 2% year-to-date. The Invesco DB USD Index Bearish ETF UDN Instead, it’s an inverse, or short, US dollar ETF.

Also read: Gasoline Gas Quick Guide to Currency ETFs

Hartnett’s Dollar Bearishness: Six Reasons

1. Soaring US Budget Deficit: The US federal deficit was $1.8 trillion over the past 12 months, 6.5% of GDP
2. The US debt ceiling deadline is approaching with a budget deficit of $378 billion in March, shrinking cash balances to just $109 billion. The US government is threatening to run out of cash by July 4th.
3. Rising default probabilities on US debt: 5-year CDS at 45 basis points versus 15 basis points a year ago.
4. The US banking crisis is making the US dollar less of a “safe haven”.
5. The “petroyuan” idea is gaining momentum as war forces countries to trade different currencies.
6. China and Japan are reducing their government bond holdings; Foreigners own $7.4 trillion in government bonds.

Hartnett turns bullish on gold: Hartnett argues that the US dollar is currently in its fourth bear market in 50 years, which bodes well for gold, oil, the euro and international stocks. However, the analyst noted that pessimism is so strong right now, with nearly two full percent…