Don’t Trust This Stock Rally. Strategists See More Trouble Ahead for S&P 500.

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Only 30% of the indicators that typically light up before market bottoms are triggered today, according to Bank of America.

Angela Weiss/AFP via Getty Images

The

S&P 500’s
15% summer bounce off its June lows may be as fleeting as the relief from the heat a weekend at the beach provides.

Bank of America strategists told clients in a note on Thursday that they don’t see enough signposts to signal the end of a bear market. Instead, there are signs of trouble ahead—enough to recommend investors to be more strategic rather than jumping in.

The BofA team sees multiple reasons for caution. While there is a view on Wall Street that if everyone is bearish, it’s time to buy, these strategists don’t see that sentiment on Main Street. U.S. households represent $38 trillion in assets, or about 52% of the U.S. equity market, and these folks have not yet begun to sell.

“Households bought $5.9 trillion in equities over the past two years through the end of the first quarter 2022, with inflows recorded in every quarter since Covid,” the strategists write. “Historically, the past three major market lows have occurred 1-2 quarters after substantial household investor selling.”The “big” money, or institutional investors, are also still buying as private markets see robust fundraising. Private markets raised $800 billion so far this year—a pace on track to hit $1.4 trillion by year-end, according to Preqin. These types of inflows across both public and private markets is yet another sign for the BofA team that the market hasn’t seen “liquidity constrained ‘panic’ “ that typically comes alongside the end of a bear market.

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