Bank of America warns: S&P 500 approaches sell signal, 6300 points is the key threshold
Bank of America strategist Michael Hartnett warned that the S&P 500 is nearing historical highs, which could trigger sell signals, advising investors to reduce holdings if it breaks through 6,300 points. Hartnett pointed out that the risk of a market bubble is rising, and overbought conditions may persist. Although U.S. stocks have risen due to economic resilience and a tech stock boom, trade concerns remain, leading to declines in stock index futures. Bank of America clients are exiting U.S. stocks at the fastest pace
According to the Zhitong Finance APP, Bank of America strategist Michael Hartnett pointed out that after the S&P 500 index rose to a historical high, it is on the verge of triggering a sell signal. He suggested that investors begin to reduce their holdings when the benchmark index breaks through 6,300 points—this level is only 0.3% higher than Thursday's closing price. Hartnett also reiterated that as the House passes a $3.4 trillion tax cut fiscal plan, the risk of a summer market bubble is accumulating.
"The overbought market may remain overbought, as greed is harder to overcome than fear," Hartnett wrote in the report.
The Bank of America research team described the current market situation as a struggle between "bubble and collapse," pointing out that the summer risk leans towards the S&P 500 index reaching 7,000 points rather than dipping to 5,000 points. According to Bank of America citing EPFR Global data, for the week ending July 2, money market funds attracted $56.4 billion in inflows, bonds received $20.5 billion in funding, while stocks, gold, and cryptocurrency funds recorded net inflows of $2.2 billion, $1.4 billion, and $1 billion, respectively.
Driven by signals of U.S. economic resilience and Donald Trump's softened stance on tariffs, U.S. stocks have surged to historical highs, reigniting market speculation, with tech giants once again in favor and the artificial intelligence boom making a comeback.
However, trade concerns remain at the core, as Trump stated that his administration would begin sending letters to trade partners setting unilateral tariff rates on Friday. As a result, U.S. stock index futures fell in early trading on Friday, while the spot market was closed due to the Independence Day holiday.
It is worth mentioning that as the S&P 500 index closed at a record level at the end of June and welcomed its best-performing quarter of 2023, many investors are gradually reducing their risk exposure. Bank of America clients are withdrawing from U.S. stocks at the fastest pace in 10 weeks.
Quantitative strategist Jill Carey Hall and others at the bank noted in a report released on Tuesday that last week, all major client groups, including institutional investors, retail traders, and hedge funds, collectively withdrew $1.3 billion from U.S. stocks. This sell-off occurred while the S&P 500 index rose 3.4% over five trading days, marking the first historical high since February
