S&P 500 rally brings it closer to sell signal: BoFA

While global stocks are likely to continue higher despite fresh tariff concerns, Bank of America strategist Michael Hartnett has warned that moves above 6,300 for the S&P 500 could trigger a “sell signal.”

Bank of America strategists said in a research report that investors have allocated significant funds into cash and bonds in recent days, even as stocks rallied to record highs.

Both the Dow Jones Industrial Average and the Nasdaq Composite edged higher as markets welcomed the easing of Middle East tensions and positive sentiment driven by macroeconomic tailwinds.

Fresh trade war risks

The S&P 500 has had a stunning past few weeks, with a notable stocks bounce in May seeing the benchmark index hit new record highs as it closed at 6,279.35 on Thursday. Major U.S. indices advanced on better-than-expected payrolls data before markets closed for the July 4 Independence Day holiday.

Although upward momentum may persist into next week, analysts caution that a continued rally could place the S&P 500 on the edge of a sell signal.

This outlook coincides with renewed concerns over trade policy, as President Donald Trump’s recent tariff remarks have brought trade war risks back into focus. With the 90-day tariff pause nearing its end, some investors are adopting a more cautious stance.

Hartnett suggests that if the current optimism holds and the S&P 500 surpasses the 6,300 mark in the coming weeks, a period of selling could be imminent.

As well as the extended rally, BoFA strategists say bubble risks are growing, particularly after Congress approved Trump’s ‘One Big Beautiful Bill’ – a policy and tax bill featuring a $3.4 trillion package. 

S&P 500 near “bubble or burst” scenario

According to Bank of America researchers, the market is approaching a critical juncture they describe as a “bubble or bust” scenario. In their assessment, the likelihood of the S&P 500 rallying to 7,000 this summer outweighs the probability of a sharp decline to 5,000.

The bank also reported that investors funneled more than $56 billion into money market funds last week, while bonds attracted over $20 billion in weekly inflows through July 2.

Equities recorded net inflows of $2.2 billion, with gold attracting $1.4 billion and cryptocurrency funds drawing more than $1 billion. The surge into digital asset investment funds came as Bitcoin (BTC) briefly spiked above $110,000 before pulling back below the key psychological level.