Wall Street rises as materials and crypto stocks offset continued bond sell-off
Investing.com -- Bank of America’s Bull & Bear Indicator has hit 8.0, triggering a contrarian sell signal for risk assets, but strategists led by Michael Hartnett say investors are unlikely to trim equity longs ahead of what could be a historic wave of initial public offerings (IPOs).
The indicator rose to 8.0 from 7.8, driven by surging tech inflows, a record monthly jump in fund manager equity allocations, and a drop in cash levels to 3.9%. There have been 17 such sell signals since 2002, with global stocks averaging a loss of 2-3% over the following two to three months, the strategists noted.
But with bond yields breaking higher and consensus at maximum bullish on positioning and profits, the team sees the case for some profit taking, just not yet. "No one cutting longs in stocks before historic IPOs and big top Policy tightening will come after CPI hits 4-5% in coming months," the team wrote.
On those IPOs, BofA found that outcomes around the ten largest listings of all time were mixed. Alibaba and ICBC proved "rocket fuel" for Chinese equities in the months that followed, while Visa and AIA turned out to be toppy markers, with broader indices materially lower nine to twelve months later.
The strategists also flagged a growing disconnect between Wall Street and Main Street. Consumer stocks on an equal-weighted basis have fallen below their post-GFC lows relative to the S&P 500, while Trump’s approval on inflation stands at just 28%.
BofA sees consumer stocks as the best post-bubble contrarian play, while the best AI trade will be small-cap adopters that "kill monopolies, duopolies, oligopolies — just like late ’70s after Nifty Fifty pop." Emerging market (EM) and commodities, strategists said, remain structural bulls.
Bonds dominated the flows in the past week, drawing $30.5 billion — their 56th consecutive week of inflows — while stocks attracted just $2.4 billion and crypto saw its biggest outflow since February at $1.5 billion.
Tech led within equities with a $9.0 billion inflow, its largest since October 2025, while Treasuries took in $10.8 billion, the most in nine weeks.
On the other side, Financials shed $2.4 billion and Materials lost $2.9 billion. Europe recorded its sixth straight week of outflows, and emerging market equities extended their own six-week losing streak at $7.9 billion, the longest such run since November 2024.
