Stocks have more room to fall as a recession, credit event lay ahead before the Fed eases policy, Bank of America warns

• Stocks have further downside potential, Bank of America strategists said.
• That's because a recession and credit event could be in store before the Fed eases monetary policy.
• Bond yields are soaring as markets adjust to the outlook of higher-for-longer interest rates. 

Stocks could have more room to fall, as investors face a possible recession and a credit event before the US central bank pulls back on its restrictive monetary policy, according to Bank of America strategists.

"Still bearish [on] risk asset," a team of strategists led by Michael Hartnett wrote in a note on Friday.

"Higher-for-longer = hard landing," the bank's strategists warned. "Impatiently waiting for capitulation selling + recession/credit event to trigger bullish policy easing and trigger big rally & assets that have already discounted recession," they added.