S&P 500 Surge Approaches Sell Signal, Says Bank of America
Despite ongoing concerns about tariffs, global stock markets are expected to continue their upward trajectory; however, Bank of America strategist Michael Hartnett warns that surpassing 6,300 on the S&P 500 could trigger a “sell signal.”
A recent report from Bank of America strategists highlights that investors have redirected significant capital into cash and bonds even as stocks reached new historic highs.
The Dow Jones Industrial Average and the Nasdaq Composite reported modest gains as markets responded positively to reduced tensions in the Middle East and encouraging macroeconomic conditions.
Emerging Trade War Risks
The S&P 500’s impressive performance in recent weeks features a notable rebound in May, culminating in a record close of 6,279.35 on Thursday. Major U.S. indices advanced following strong payroll data ahead of the Independence Day holiday on July 4.
While the upward trajectory may persist into the following week, analysts caution that an extended rally could lead the S&P 500 towards a potential sell signal.
This view resonates with revived concerns regarding trade policy, as recent tariff remarks from President Donald Trump have stoked fears of a trade war. With the 90-day tariff suspension approaching its end, some investors are becoming more prudent.
Hartnett suggests that if the current optimistic sentiment continues and the S&P 500 surpasses the 6,300 mark in the weeks to come, a selling phase might be imminent.
Alongside the ongoing rally, Bank of America strategists express apprehensions about bubble risks, particularly in light of Congress’s endorsement of Trump’s ‘One Big Beautiful Bill’ – a $3.4 trillion policy and tax initiative.
S&P 500 Approaching “Bubble or Burst” Scenario
Bank of America researchers posit that the market is approaching a critical juncture, termed a “bubble or bust” scenario. They believe the probability of the S&P 500 climbing to 7,000 this summer is greater than that of a sudden drop to 5,000.
“Overbought markets can remain overbought as greed is harder to conquer than fear,” Hartnett remarked.
The bank also noted that investors channeled over $56 billion into money market funds last week, while bonds saw more than $20 billion in inflows through July 2.
Equities recorded net inflows of $2.2 billion, with gold attracting $1.4 billion, and cryptocurrency funds drawing over $1 billion. The surge into digital asset investment coincided with Bitcoin (BTC) briefly exceeding $110,000 before retreating below this key psychological threshold.