Bank of America Research has issued a fresh warning for equity investors: the S&P 500, now hovering near historic highs, is demonstrating elevated risk levels with 60% of the firm’s proprietary “bear market signposts” flashing red—just shy of the point that has historically heralded a market peak. The bank’s S&P 500 Relative Value Cheat Sheet, published Monday, reflected growing caution among the team led by Head of U.S. Equity Strategy Savita Subramanian.
Subramanian’s team argued that investors should be increasingly selective, as the broad index has become “statistically expensive on everything.” All 20 of the valuation metrics tracked by her team are at expensive levels, and in fact have never been more expensive in several key areas, including market cap to GDP. The S&P 500 is also trading above its Tech Bubble levels on nine different metrics, Subramanian’s team noted.
