ANALYST: Beware The Market Melt-Up

"With 56% of the world economy under zero rate policies, $1.8 trillion in central bank liquidity in 2014, and the equity float set to decrease by $565 billion this year, the summer risk remains for a melt-up in stock, credit, and bond prices rather than a melt-down," he writes.

Hartnett invokes a notorious phrase last seen in the dot-com-bubble runup. There's been lots of debate about whether this time is different - see this recent David Leonhardt piece in which Robert Shiller tells him that, no, "this time" is usually the same - but Hartnett goes there.

"New summer highs in equities are likely to be aided and abetted by 'irrational exuberance' in both credit markets and carry trades. Zero rates continue to induce asset manias."

The catalyst to any correction will likely be an acceleration in the Fed's tapering, Hartnett says, although it's still not clear when that acceleration will occur. The Fed just announced it had only just begun the-consideration-of-considering how it should normalize its policies.

"When the end of zero rates is threatened, likely this autumn as unemployment rates drop to uncomfortably low levels, both credit & stock markets should correct sharply," he writes.

While BAML's economists still forecast 3% growth for both GDP and U.S. 10-year-note yields for 2014, Hartnett warns that things like the "Japanification of Europe" could cause European investors to further increase their demand for U.S. notes, and that more lackluster housing data could derail U.S. growth.

For now, lots of investors have begun increasing cash holdings. That, Hartnett says, "[suggests] the pain trade could be higher stock, credit, and bond prices."