Bank of America strategists, led by Savita Subramanian, are telling investors to take profits as cracks widen beneath the surface of the U.S. stock market. In a note dated June 5, the BofA Global Research team revealed that 70% of its bear-market indicators have now been triggered, a level historically associated with market peaks.
The warning comes as the S&P 500 remains statistically expensive on 17 out of 20 valuation metrics and trades above its dot-com bubble levels on eight of those measures. The bank maintains a year-end S&P 500 target of 7,100—roughly 4.5% below its closing level of 7,406 on Monday—while advocating for selective stock picking over broad index exposure.
Inside the technology sector, the performance gap between the best and worst stocks has widened to levels last seen in February 2000, during the peak of the dot-com era. High price-to-earnings stocks continue to outperform cheaper peers, a pattern BofA calls a "sign of excessive speculation." Long-term growth expectations for the S&P 500 have climbed to levels that make equities "more vulnerable to disappointment." Meanwhile, the Federal Reserve’s Senior Loan Officer Opinion Survey showed demand for consumer loans continued to fall, adding to signs of softening consumer confidence.
The bank highlights that hyperscaler capital expenditure on AI infrastructure could approach 100% of operating cash flow by year-end, up from about 40% in 2023. While higher AI spending may support long-term growth, it can squeeze margins and reduce capacity for buybacks and dividends—key pillars of stock market demand. Large IPOs and secondary offerings are also being watched as potential liquidity drains in an already crowded market.
This caution played out against volatile trading sessions that saw $430 billion wiped from the U.S. stock market in 90 minutes, before a partial recovery fueled by geopolitical comments on an Israel-Iran ceasefire. Crypto-linked assets moved in tandem during these swings, reflecting the high correlation between digital assets and risk-on equities. Bitcoin and ether prices gyrated alongside the S&P 500 and Nasdaq, underlining how a sustained equity downturn could pressure the crypto market.
Bank of America is not calling for a full exit, but rather a shift toward individual stocks with stronger earnings revisions, valuation support, and cash-flow profiles. Energy, financials, materials, and consumer staples rank highest in the bank's tactical model. For crypto traders, the message is clear: watch the macro signals, because the correlation between stocks and digital assets remains strong, and a prolonged equity selloff would likely spill over into Bitcoin and altcoins.
