Yahoo Finance
Amid a fire hose of financial forecasts and guidance from endless talking heads, CEOs, social media personalities and others, more and more industry watchers are pointing to telltale signs that the stock market’s bull run can’t last much longer.
One of these is Michael Hartnett, managing director and chief investment strategist at the Bank of America’s research arm.
He issued some guidance to clients this past week that’s very telling of his blunt prognosis for the current AI frenzy: prepare for the bubble to burst.
Robert Kiyosaki saysthis 1 asset will surge 400% in a yearand begs investors not to miss this ‘explosion’ Prime US real estate was a rich person's game — then something changed.Now everyday Americans are getting a piece of the action for as little as $100 Millionaires under 43 are reshaping investing — just 25% of their portfolios are in stocks.Here’s where their money is going Hartnett — who coined the term The Magnificent Seven (1) for the seven largest tech stocks — hasn’t written Substack diatribes or given tons of interviews, as industry gurus likeMichael Burry,Jamie Dimonand others (2) have.
But his “post-bubble roadmap” offers a stark picture.
His research report, The Flow Show, is not available publicly (3), but excerpts have been published (4).
On Friday, yet another unignorable, potentially calamitous pattern emerged in the S&P 500 that pricked the ears of Hartnett and others.
While the index hit another record closing high (5), it was only 21 stocks that led it there — just one more than the 20 that propelled the dot-com bubble to its peak before everything came crashing down in 2000.
Other key red flags behind recent performance include what Hartnett called “speculative” and “exponential price action;” overvaluation of firms that have yet to produce earnings relative to their stock price; a high bull & bear indicator; extreme imbalance and over-concentration, with only 10 stocks comprising two-fifths of the index’s power; and the fact that the vast majority of S&P components (upwards of 330) are now sitting at 20-40% below their previous highs.
All of this and more has driven Hartnett and his team to issue some simple advice that he believes will prove necessary in the near future.
To mitigate the damage of a potential correction, they suggest the tried-and-true strategy of leaning into bonds — a historically reliable, but perhaps boring area of the market that isn’t high-flying right now.
“Post-bubble investor roadmap since 1929 is long bonds, and long combo of defensives and/or sectors which dramatically underperformed in the last months of the bubble,” the memo states.
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