{"id":244218,"date":"2025-10-22T19:05:12","date_gmt":"2025-10-22T19:05:12","guid":{"rendered":"https:\/\/www.newsbeep.com\/us\/244218\/"},"modified":"2025-10-22T19:05:12","modified_gmt":"2025-10-22T19:05:12","slug":"the-sp-500-is-close-to-market-peak-based-on-how-many-bear-market-signposts-its-hitting-bofa-says-a-whopping-60","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us\/244218\/","title":{"rendered":"The S&P 500 is close to market peak based on how many ‘bear market signposts’ it’s hitting, BofA says: a whopping 60%"},"content":{"rendered":"

Bank of America<\/a> Research has issued a fresh warning for equity investors: the S&P 500, now hovering near historic highs, is demonstrating elevated risk levels with 60% of the firm\u2019s proprietary \u201cbear market signposts\u201d flashing red\u2014just shy of the point that has historically heralded a market peak. The bank\u2019s S&P 500 Relative Value Cheat Sheet, published Monday, reflected growing caution among the team led by Head of U.S. Equity Strategy Savita Subramanian.<\/p>\n

Subramanian\u2019s team argued that investors should be increasingly selective, as the broad index has become \u201cstatistically expensive\u00a0on\u00a0everything.\u201d All 20 of the valuation metrics tracked by her team are at expensive levels, and in fact have never been more expensive in several key areas, including market cap to GDP. The S&P 500 is also trading above its Tech Bubble levels on nine different metrics, Subramanian\u2019s team noted.<\/p>\n

BofA\u2019s methodology tracks 10 signals that tend to precede cyclical market tops. Currently, six out of these ten are triggered, including elevated price-to-earnings ratios, extreme outperformance of high-multiple stocks compared to cheaper ones, and loosening credit conditions. Historically, major market peaks have occurred when roughly 70% of these indicators were triggered, making today\u2019s 60% worryingly close. According to BofA\u2019s strategists, these \u201cbear market signposts \u2014\u00a0the triggers that typically precede an S&P 500 peak \u2014\u00a0suggest additional caution.\u201d<\/p>\n

Subramanian is far from the only analyst urging caution. Morgan Stanley Wealth Management CIO Lisa Shalett told Fortune<\/a> earlier this month she was concerned about a \u201cCisco moment,\u201d like when the dotcom bubble burst and that stock lost 80% almost overnight. She highlighted that artificial intelligence (AI) has almost a total grip on the S&P 500, accounting for 75% of gains, 80% of profits and 90% of capex since the rally of the last few years began. She added she isn\u2019t concerned about the next nine months, per se, but \u201cvery concerned\u201d about what comes after that.<\/p>\n

BofA\u2019s semiconductors analyst Vivek Arya was more sanguine, arguing to Fortune that companies are more anxious about maintaining 2025\u2019s robust capex levels than about an imminent downturn. Still, Arya said he was confident about both the next 12 months and the next five years, but \u201ccan there be periods of digestion in between? Yeah.\u201d<\/p>\n

Market drivers and emerging risks<\/p>\n

The new BofA report also highlights possible cracks beneath the market\u2019s surface. While recent gains have been propelled by resilience in mega-cap tech stocks and the enduring strength of the U.S. consumer, strategists warn that these drivers could be at odds. For example, artificial intelligence\u2014one of the market\u2019s hottest themes\u2014could reduce demand for professional services, potentially impacting an area that has driven much of the consumption growth since the 1980s.<\/p>\n

Subramanian previously told Fortune<\/a> that she sees AI as key to resolving the famous \u201cproductivity paradox\u201d identified by Nobel laureate Robert Solow: the idea that computers are visible everywhere, except in productivity statistics. She said she\u2019s seeing hints in data going back to roughly 2022 that S&P 500 firms have learned how to work harder and smarter, often replacing people with process. \u201cA process is almost free and it\u2019s replicable for eternity,\u201d she said, adding it\u2019s a more complex story than AI displacing workers, but a fundamental shift in how business is being done.<\/p>\n

Still, she warned in October that risks are mounting in the rapidly evolving world of private lending. Since the 2008 financial crisis, non-bank lenders have supplanted traditional banks, and instability in private credit could force pension funds and other large investors to sell S&P 500 index funds, potentially exacerbating volatility. The domination of passive investing further increases concerns\u2014should these asset owners turn to selling, liquidity in the S&P 500 could dry up with alarming speed.\u200b<\/p>\n

Subramanian spotlighted the AI sector, writing that \u201cAI funding\u00a0has\u00a0formed a\u00a0Gordian [sic] knot\u00a0involving mega caps, transfer payments,\u00a0even\u00a0the\u00a0US government,\u201d referring to the famous legend about how Alexander the Great<\/a> was faced with a knot so tangled that he had no point except to cut through it with a sword. The U.S. government\u2019s involvement with taking an equity stake in Intel<\/a>, for instance, and Nvidia\u2019s centrality to the story, were other allusions. Subramanian said this is \u201cnot a risk\u00a0in itself\u00a0but\u00a0a complicating factor.\u201d<\/p>\n

October\u2019s unexpected U.S. government shutdown and renewed trade tensions with China have added fog to an already hazy macroeconomic environment, slowing both project planning and economic activity. BofA also points to a record 54% of investors who now believe that AI stocks are in a bubble, according to its most recent Global Fund Manager Survey\u2014another reason for heightened vigilance around the market\u2019s uneasy exuberance.<\/p>\n

As investors stare down a market where euphoria and real risk walk hand-in-hand, BofA\u2019s 60% bear signpost warning serves as a timely reminder: cycle tops may only become obvious in hindsight, but the flashing risk signals are here now.<\/p>\n","protected":false},"excerpt":{"rendered":"Bank of America Research has issued a fresh warning for equity investors: the S&P 500, now hovering near…\n","protected":false},"author":2,"featured_media":244219,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[37],"tags":[32048,28,112],"class_list":["post-244218","post","type-post","status-publish","format-standard","has-post-thumbnail","category-markets","tag-bubble","tag-business","tag-markets"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/244218","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=244218"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/244218\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/244219"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=244218"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=244218"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=244218"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}