Bank of America Warns of Stock Market Bear Signal Intensity

June 9 – Bank of America Securities is advising investors to stay cautious on U.S. stocks, as a growing slate of bearish signals suggests the market is nearing a peak, according to the firm’s latest analysis. In a June 5 report led by strategist Savita Subramanian, the team noted roughly 70% of historical bear-market warning signs have been triggered – a level consistent with what’s typically seen at past market tops. Of the 20 valuation metrics tracked for the S&P 500, 17 show statistically significant overvaluation, with 8 of those indicators even exceeding levels hit during the dot-com bubble. Adding to concerns: high price-to-earnings (P/E) stocks have meaningfully outperformed low-valuation peers, a trend Subramanian’s team frames as "excessive speculation." Within the tech sector, the performance gap between the top and bottom 5th percentiles of stocks has widened to its widest point since February 2000. The S&P 500’s strong headline returns mask deep internal splits: the return difference between the top and bottom 10% of index constituents over the past three months has climbed to post-pandemic highs. While some tech stocks still hold healthy fundamentals, Subramanian flagged headwinds including stalled cash flow conversion, rising supply of investment-grade bonds and stocks, a shrinking share of buybacks relative to market capitalization, and mega-cap cloud companies’ capital expenditures on track to hit 100% of operating cash flow by year-end – up from just 40% in 2023. (Source: FXstreet)