Ananda Banerjee
4 min read
Bank of America has told investors to take profits. 7 of its 10 bear market signals are flashing. This is the average count before every major downturn since 1990.
However, one crypto gauge fired even earlier.
What the Bank of America’s Stock Market Warning Says
The warning came in a June 5 note from Savita Subramanian, the bank’s head of US equity strategy. Its title was blunt: “Too many red flags. Take profits.”
BofA tracks ten conditions that usually appear before markets peak. Four had fired by March. Seven by May. The S&P 500 fell 2.6% that Friday, its worst day since October.
The triggers include tighter bank lending, gloomy consumers, a dealmaking boom, and an index that screens expensive on 17 of 20 measures.
Still, it is not a sell-everything call.
“We see opportunity in S&P 500 stocks, but not the overall cap-weighted index,” Subramanian wrote.
What the Warning Means
In plain terms, stocks are priced for perfection, a few giants carry the market, and money is getting harder to borrow. That mix has ended badly before.
BofA does not track crypto. Yet crypto has often cracked two to six weeks before stock market tops. The exclusive Crypto Canary Composite measures that stress.
The gauge reads 69.1, inside its warning band. Bitcoin’s drawdown stress is at its maximum. Stablecoin supply is shrinking, and cash is leaving crypto. And Bitcoin still trades in step with stocks, so the stress can spread.
If the pattern holds, the risk window runs into mid-July. The signal is suggestive, not predictive.
What the Charts Show
Expensive stocks are beating cheap ones by a rare margin. The gap between growth and value hit a z-score of 2.89 in early June. Readings above 2 are rare. It has since cooled to 1.12, which could signal relief or the start of a larger unwind.
