Bank of America(US:BAC) Hua Er Jie Jian Wen·2025-06-28 04:22Core Viewpoint - The U.S. stock market is approaching a technical "sell signal," but potential changes in the policy environment could create a market bubble in the second half of the year [1][4]. Group 1: Technical Indicators - Multiple technical indicators from Bank of America show that the U.S. stock market is nearing critical thresholds, with 73% of MSCI global country indices trading above their 50-day and 200-day moving averages, while the critical point is 88% [5]. - The S&P 500 index could trigger a "sell signal" if it breaks through 6300 points in July [5]. - The global fund flow indicator is also cautious, with the ratio of funds flowing into global stocks and high-yield bonds reaching 0.99%, close to the 1.0% "greed" threshold [5]. Group 2: Policy Environment - Despite the technical sell signals, the policy environment is expected to provide support in the second half of the year, with global central banks having cut rates 64 times this year [7]. - The Federal Reserve may join in rate cuts to address slowing economic growth in the U.S. [7]. - The anticipated nomination of a new Federal Reserve Chair by Trump in the fall could lead to a decline in the dollar, as historical data suggests such nominations typically result in a weaker dollar [1][13]. Group 3: Investment Strategy - Bank of America recommends investors adhere to the "BIG" strategy, which includes bonds, international stocks, and gold, with gold being the best hedge against a weakening dollar [4][15]. - The firm suggests that while technical indicators are nearing sell signals, the risk of a bubble remains high if policies shift from tariffs to tax cuts and rate reductions [4][15]. Group 4: Fund Flows - Recent fund flows show a divergence, with $26 billion flowing into cash, $12.1 billion into bonds, $3.5 billion into stocks, $2.8 billion into gold, and $2.1 billion into cryptocurrencies [10]. - Emerging market bonds saw a record inflow of $5.8 billion in a single week, while U.S. small-cap stocks experienced an outflow of $4.4 billion, the largest since December 2024 [10]. Group 5: Market Participation - The current market rally is primarily driven by a narrow group of stocks, with only 22 S&P 500 constituents at all-time highs, significantly lower than previous major breakouts [6]. - The "Mag7" stocks account for 14.8% of the assets under management in Bank of America's private client portfolios, indicating a high concentration in large tech stocks [6].