📖 Your Q2 Earnings Guide: Discover the Stocks ProPicks AI Highlights to Jump Post-EarningsRead more

How do bull markets end - BofA

Published 06/14/2024, 07:08 AM
© Reuters

While the S&P 500 continues to climb and volatility remains low, Bank of America acknowledges investor concerns about potential warning signs for a market peak.

BofA analysts revisited historical data to identify the most reliable indicators of a bull market's end.

According to the bank, is that only 40% of these indicators have currently been triggered, compared to an average of 70% before prior peaks.

BofA highlights 10 key factors that have historically preceded market peaks with minimal false positives. These include overly optimistic sentiment, signs of excessive confidence, high valuations, and signs of tightening monetary policy or lending restrictions.

However, the bank also recognizes that unforeseen triggers can play a role, which are then addressed during the subsequent market cycle.

They reassure investors that some commonly cited concerns hold little weight. For instance, historically, periods of restrictive monetary policy, indicated by Fed rates exceeding the neutral rate, haven't necessarily prevented bull markets.

Similarly, a low VIX alone shouldn't be a cause for alarm, as it can simply indicate a period due for a volatility spike.

BofA advises against attempting to time the market peak. Their analysis shows that remaining invested generally outperforms attempting to sell early. While strategically selling 1-3 months beforehand might limit downside risk, the long-term benefits of staying invested outweigh the potential short-term gains.

The firm emphasizes that time in the market is a valuable asset, with the probability of loss decreasing significantly as investment horizons lengthen.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.