Bank of America: The S&P 500 and the 6300 Level That Could Change Everything

Investors poured significant funds into cash and bonds over the past week, according to Bank of America. Strategists led by Michael Hartnett noted that if the S&P 500 index moves above 6300 in July, it will likely trigger a “sell signal.”

“Overbought markets can stay overbought because greed is harder to overcome than fear,” Hartnett wrote in a note.

The bank’s research team describes the market situation as “bubble or bust,” with the summer risk tilted more toward a climb to 7000 for the S&P 500 than a drop to 5000.

Money market funds attracted $56.4 billion, while bonds registered an inflow of $20.5 billion for the week ending July 2, according to EPFR Global data cited by Bank of America. Equities received $2.2 billion, gold — $1.4 billion, and crypto funds — $1 billion.

Significant flows:

• Treasuries recorded the largest outflow in nine weeks — $2.7 billion.
• Investment-grade corporate bonds attracted $16.7 billion — the biggest inflow since June 2020.
• US growth stocks saw an outflow of $5 billion — the largest since March.
• US mid-cap stocks lost $5.7 billion, the biggest outflow since July 2023.
• Financial sector funds attracted $1.6 billion, the largest inflow since January.

Bank of America’s private clients, managing about $4 trillion, have increased their equity exposure to 63.7%, the highest level since March 2022. At the same time, they have reduced bond holdings to 18.5%, the lowest since June 2022, while maintaining 10.8% in cash..

By region:

• US equities experienced a second consecutive week of outflows totaling $1.9 billion.
• European equities recorded a third consecutive inflow of $600 million.
• Emerging market stocks are again in outflow — $500 million.
• Japanese stocks saw a fourth consecutive week of outflows, totaling $2.8 billion.