Is the rebound in US stocks about to peak? Bank of America strategists warn: Beware of "good news fully priced in"
Michael Hartnett, Chief Investment Strategist at Bank of America, warned that the recent rebound in U.S. stocks may be nearing its end, and investors should be cautious of the trading logic of "buy on expectations, sell on facts." Although trade policy easing has driven the S&P 500 index up by 14%, it is still down 3.7% year-to-date. Hartnett suggests a "heavy bond, light equity" approach for 2025 and emphasizes the importance of monitoring U.S.-China tariff negotiations and Trump's trade agreement with the UK, reminding investors to pay attention to the alignment between policy details and corporate earnings prospects
According to the Zhitong Finance APP, Michael Hartnett, Chief Investment Strategist at Bank of America, has warned that despite the recent significant rebound in U.S. stocks driven by expectations of easing trade policies, this wave of gains may be nearing its end. In his latest research report, he pointed out that investors should be wary of the classic trading logic of "buy the expectation, sell the fact"—when favorable policies are actually implemented, the market may turn to a correction due to the prior gains being overextended.
Since April 9, when Trump announced the suspension of some tariffs on China, the S&P 500 index has risen a cumulative 14%, but it is still down 3.7% year-to-date, significantly underperforming other major global markets. However, there have been recent signs of easing trade policies: over the weekend, news emerged from U.S.-China negotiations that tariffs could be significantly reduced, and the Trump administration reached a "breakthrough" trade framework agreement with the UK, which has continued to boost market sentiment.
Additionally, Hartnett provided clear recommendations on asset allocation: by 2025, investors should "favor bonds over stocks," and within equity assets, he prefers international markets over the U.S. domestic market. He analyzed that the current U.S. stock market is in the "late stage of a structural bear market," significantly lacking in value compared to non-U.S. stock markets. Data on capital flows also supports this view—Bank of America cited EPFR Global data showing that net redemptions in the U.S. stock market reached $24.8 billion over the past four weeks, marking the largest single-week capital outflow in two years.
The current market is closely monitoring the progress of two major events: first, the tariff negotiations between the U.S. and China taking place this weekend, and second, the details of the "breakthrough" trade framework agreement reached between the Trump administration and the UK. Hartnett cautioned that even if tariff reductions are ultimately implemented, it may encounter the classic scenario of "good news being priced in as bad news," and investors need to closely watch the alignment between policy details and corporate earnings prospects
