Bank of America Warns of Overly Concentrated Stock Market: Current Market Resembles Height of 2000 Dot-Com Bubble

BlockBeats News, June 1st, Bank of America's Chief Investment Strategist Michael Hartnett's latest report pointed out that the current U.S. stock market structure bears a striking resemblance to the late-stage of the 2000 Internet bubble, and investors should be cautious of the risks in the later stages of the bull market and gradually shift to defensive positioning.

Data shows that the S&P 500 index hit a record closing high on the last trading day of May, but only 20 component stocks simultaneously hit new highs, most of which were concentrated in the artificial intelligence and semiconductor sectors. Hartnett noted that in March 2000 when the Internet bubble peaked, only about 20 stocks hit new highs as well.

The recent surge in the U.S. stock market was primarily driven by the AI industry chain. In May, Micron Technology (MU) rose by 87.8%, SK Hynix rose by 81%, Advanced Micro Devices (AMD) rose by 45.6%, and Samsung Electronics rose by 43%. Boosted by this, the Nasdaq Composite Index rose by 25% in the two months from April to May, delivering its best performance in over two decades for the same period.

However, multiple market breadth indicators are weakening. BCA Research data shows that as of May 20th, only about 55% of S&P 500 component stocks were above their 200-day moving average; the Advance-Decline Line has been declining since mid-April, indicating that while the index hits new highs, fewer and fewer stocks are participating in the uptrend.

Hartnett believes that although the market's speculative frenzy may not have ended yet, central bank policy tightening and a high-interest-rate environment may ultimately become the turning point of this bull market. He advises investors to gradually increase their holdings in long-term bonds, defensive sectors, and sectors that have underperformed in the late stages of a bubble to mitigate potential market pullback risks.