US stocks could drop another 4% as the economic turmoil in China spooks global investors and bond yields surge, according to Bank of America Corp.’s Michael Hartnett.

The strategist — who has held on to his bearish outlook this year even as equities rallied — said a further spike in Treasury yields and a weakening Chinese yuan could push the S&P 500 to 4,200 points — nearly 4% lower than current levels.

Still, a “correction” may be postponed if “critical” bond and currency levels are defended at the Kansas City Federal Reserve’s Jackson Hole Economic Policy Symposium next week, Hartnett wrote in a note on Friday.

Global markets have been roiled this week on growing concerns about the impact of China’s property crisis and troubles in its shadow banking system on the broader economy. In the US, minutes from the Federal Reserve’s latest policy-setting meeting also showed officials remain concerned about inflation, renewing jitters over the prospect of sustained higher interest rates.

The US 10-year Treasury yield retreated Friday after nearing the highest level since before the financial crisis. US stock futures pointed to further losses in regular trading, setting up the underlying indexes for their third-straight weekly decline. Meanwhile, China has escalated support for the embattled yuan, only to see it sinking toward multi-year lows.

The Cboe equity put-to-call ratio surged above 1 on Wednesday to its highest level since the banking turmoil in March — a sign that investors are piling on protection as they expect greater volatility in single stocks. That’s “a bad sign if stocks can’t hold” at current levels, Hartnett said.

The strategist had said last month that he would recommend shorting US stocks in late-August or early-September following the strong rally earlier this year. Hartnett reiterated on Friday that a pullback would be “healthy.”

“Nonetheless, cyclically we remain in the ‘sell the last hike’ camp,” he added.

Other strategists such as JPMorgan Chase & Co,’s Marko Kolanovic have also recently warned of the market risks from higher-for-longer inflation. Strategists at Citigroup Inc. led by Chris Montagu said earlier this week that flows tracked by the firm suggest US stock investors have turned near-term bearish on technology shares, which have led this year’s rally in equities.

In another sign of investor nervousness, cash funds have seen inflows of $925 billion this year, surpassing the previous record in 2020, according to the note from Bank of America citing EPFR Global data.