Bank of America's proprietary Bull & Bear Indicator has remained in sell-signal territory since May 2026, with July weekly readings ranging from 9.5 to 9.6 on a 10-point scale, the highest levels since 2021. The indicator, which blends institutional positioning, equity and bond flows, global stock-index breadth, and credit-market technicals, crosses above 8.0 to trigger a contrarian sell signal. Chief investment strategist Michael Hartnett said in a client note that "extreme bull positioning says reduce risk exposure," as fund-manager positioning hit the 99th percentile, equity flows the 93rd, hedge-fund exposure the 83rd, and credit technicals the 77th. A second threshold fired as managers cut cash reserves to 3.5% of assets under management in the August Global Fund Manager Survey, breaching the 4.0% Cash Rule. Historically, the indicator has fired 17 sell signals since 1998, with global stocks averaging declines of 2% to 3% in the two to three months following each signal, falling 60% of the time, with worst drawdowns of 15% to 20%. However, the current signal, triggered on May 26, has seen the S&P 500 gain 1.6% and the MSCI ACWI advance 1.3% since then. Morningstar's momentum data reinforces the crowding concern, with the S&P 500 Momentum Index delivering a 34% return between April and May, the strongest two-month gain since at least 1995. Philip Straehl, chief investment officer for Morningstar Wealth, told Business Insider that the surge reflects excessive optimism and leaves a cautious outlook. Investors in the SPDR S&P 500 ETF Trust (SPY) or Vanguard S&P 500 ETF (VOO) face concentration risk, as technology stocks now represent roughly one-third of the S&P 500's weight, and the 10 largest positions make up about 36% to 38% of both funds' assets. A breakdown in market breadth, with fewer stocks above their 200-day moving average, could convert vulnerability into losses, and the convergence of Bank of America's and Morningstar's signals narrows the chance of a false alarm.
Bank of America CorpBank of America's Bull & Bear Indicator signals extreme bullish positioning, prompting a contrarian sell signal and advice to reduce risk.
Morningstar IncMorningstar's momentum data cited as reinforcing crowding concerns, but no direct impact on Morningstar Inc.
