70% bear – Bank of America says 70% of its bear-market signposts were triggered in May, with multiple indicators flashing red. Strategists led by Savita Subramanian warn that the market could be nearing a top and urge investors to take profits ahead of a potential pullba
By the time May landed, Bank of America said the market’s warning lights were no longer subtle.
In a client note. strategists led by Savita Subramanian wrote that seven of the bank’s 10 “bear market indicators” have been triggered in recent months. They added that five of those indicators were triggered by April, and two more flashed red in May. The intensity matters because, in their framework, May accounted for 70% of the bank’s bear-market signposts being triggered.
The “signposts” span a broad slice of what typically shows stress before markets roll over: consumer confidence, stock performance expectations, credit stress levels, and credit tightening conditions. They also look at how parts of the market are pricing risk—down to the leadership inside equities.
One indicator. for example. showed that high price-to-earnings ratio stocks have been leading low P/E stocks by a wide margin. a sign the bank called “excessive speculation.” Another measure flagged that “lofty long-term growth expectations” have breached levels consistent with equities being “more vulnerable to disappointment.”.
Even with the S&P 500 up 8% so far this year. Bank of America said the benchmark is “statistically expensive on 17 of 20 metrics” and “trades rich versus its tech bubble metrics on eight.” In the tech sector—so dominant inside the S&P 500 that it can steer the whole index—the bank pointed to what it described as the widest dispersion in performance. with the spread between the best- and worst-performing quintiles’ median stock at its widest since February 2000.
That mismatch—healthy fundamentals in some areas, worsening signals in others—is where the alarm seems to sharpen. Bank of America noted that tech fundamentals are largely healthier than they were before the dot-com bubble popped. but “many of those measures are worsening.” Cash flow conversion has flat-lined. investment-grade credit and equity supply have increased. and buybacks as a percentage of market cap have slowed.
For hyperscalers, capital expenditures as a percentage of operating cash flow are also expected to reach near 100% by the end of the year. In the note’s wording, the message is blunt: “Extreme price action may signal rising instability.”
The bank’s view is not that every stock will stumble. It specifically said it “see[s] opportunity in S&P 500 stocks, but not the overall cap-weighted index,” adding that the indicators point to a broader turndown.
The difference between stock-picking and index-level caution shows up in the numbers. Subramanian has set her year-end S&P 500 target at 7,100, below the 7,400 points where the index traded on Monday.
Even so, the central point in Bank of America’s warning is timing. When seven of 10 indicators have already been triggered—and 70% of those signposts were triggered in May—this is the kind of setup investors watch closely for a pullback. The bank’s strategists leave little room for complacency. arguing the market may be approaching a top even as parts of it keep finding buyers.
Bank of America Savita Subramanian bear market signposts S&P 500 70% triggered in May credit stress market indicators tech sector dispersion P/E speculation price action instability year-end target 7100