Bank of America says prepare for a ‘summer correction’ after rally to record highs
U.S. stocks may be running out of room after a relentless rally, according to Bank of America strategists, who are warning investors to start preparing for a summer pullback. The bank said the S & P 500 has already reached its year-ahead target of 7,430, and several technical indicators suggest the advance is becoming stretched — prompting a shift away from chasing gains and toward protecting them. “Risk-reward is deteriorating, and multiple indicators favor a more defensive stance,” Bank of America strategists wrote in a note to clients. “Base case: maintain trend-following longs into June, prepare for summer correction.” .SPX YTD mountain S & P 500 The warning comes after U.S. stocks staged a sharp rebound from lows reached during the recent Middle East conflict, with easing geopolitical tensions helping fuel renewed appetite for risk assets. But BofA said weakening market breadth and diverging momentum signals suggest the next leg higher could prove more difficult. The bank’s base-case scenario still calls for investors to maintain trend-following long positions through June, but to brace for an elevated risk of a correction between June and September. Strategists then expect the market to regain its footing later in the year, forecasting a fourth-quarter rally consistent with the second year of the U.S. presidential cycle. Despite the near-term caution, the firm ultimately believes the market will rebound to 8,000 by the end of 2026, the same level Goldman Sachs projected Wednesday.
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