BofA’s Hartnett warns it’s ’bubble or burst’ for S&P 500

Investing.com -- Investors directed significant funds toward cash and bonds in the past week, according to Bank of America. Strategists led by Michael Hartnett noted that if the S&P 500 moves above 6300 in July, it would likely trigger a "sell signal."

"Overbought markets can stay overbought as greed is harder to conquer than fear," Hartnett wrote in a note.

The bank’s research team described market scenarios as "bubble or bust," with summer risk skewed toward the S&P 500 reaching 7,000 rather than falling to 5,000.

Money market funds attracted $56.4 billion, while bonds saw inflows of $20.5 billion for the week ended July 2, Bank of America reported, citing EPFR Global data. Equities received $2.2 billion, gold attracted $1.4 billion, and cryptocurrency funds gained $1 billion during the same period.

Notable flow patterns included Treasury securities experiencing their largest outflow in nine weeks at $2.7 billion. Investment grade bonds recorded their biggest inflow since June 2020, totaling $16.7 billion. U.S. growth stocks faced their largest outflow since March, with $5.0 billion leaving these funds.

U.S. mid-cap stocks saw significant investor exits, with outflows reaching $5.7 billion, the largest since July 2023. Financial sector funds attracted $1.6 billion, marking their biggest inflow since January.

Bank of America private clients, who manage approximately $4 trillion in assets, increased their equity allocation to 63.7%, the highest level since March 2022. These same clients reduced their bond holdings to 18.5%, the lowest since June 2022, while maintaining 10.8% in cash.

Regional fund flows showed U.S. equities experiencing their second consecutive week of outflows at $1.9 billion. European stocks recorded their third straight week of inflows at $600 million.

Emerging market (EM) stocks resumed outflows at $500 million, while Japanese equities saw their fourth consecutive week of outflows totaling $2.8 billion.

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