Bank of America Warning: Current Market Exhibiting Late-Stage Bubble Characteristics, Advises Defensive Allocation Strategy

BlockBeats News, May 29th. Bank of America pointed out that the current market is still in a "severely overbought" range, showing typical late-stage bubble characteristics. Its core contrarian indicator, the "Bull-Bear Index," has fallen to 9.4, but the risk asset "sell" signal issued since December last year remains valid. Bank of America stated that funds are flowing from tech titans, Bitcoin, and other "AI worship" assets to sectors benefiting from the real economy recovery, such as silver, industrial metals, regional banks, and small-cap value stocks. It warned that once the AI cloud service giants announce capital expenditure cuts, it could become a critical catalyst for a market style rotation.

The report recommends that investors adopt a more defensive allocation strategy in 2026, favoring long-duration US government bonds as a risk hedge tool. At the same time, it believes that as the market focus shifts from large-cap growth stocks to real economy-related assets, small-cap value stocks and emerging market equities are expected to take over from large-cap tech stocks and become the main beneficiaries of the next long-term bull market. Furthermore, Bank of America pointed out that "buy everything except the dollar" is becoming the new market theme, with AI's increased demand for commodities potentially further benefiting emerging market assets.