BofA Sell Signal Ends as Indicator Falls to 7.4, but Historical Returns Average Just 1%
Bank of America's Bull & Bear Indicator has fallen sharply from 8.4 to 7.4, its lowest reading since July 2025, officially ending the "sell signal" that has been in place since December 17, 2025. The drop was triggered by deteriorating global stock market breadth, outflows from high-yield and emerging market debt, and widening credit spreads.
Despite the signal's termination, Chief Investment Strategist Michael Hartnett warns that this is not an immediate trigger to buy. An analysis of 32 similar occurrences since 2002 shows that in the three months following the end of a sell signal, the S&P 500 and MSCI All-Country World Index delivered an average return of just 1%. Hartnett advises investors to adopt a stance of "no rush, no greed," as the market lacks a strong directional driver.
Over 67% of S&P 500 Stocks Are in Correction as "Buy Signal" Remains Distant
The market's underlying health reveals significant structural damage despite headline index levels. Within the S&P 500, 67% of its constituents (336 stocks) have fallen more than 10% from their highs, while 28% (143 stocks) have plummeted over 20%. This weakness reflects a quarter of "pain trades" where defensive assets like short-term Treasuries and the U.S. dollar have outperformed riskier assets like AI-related bonds and Bitcoin.
Hartnett states that a true contrarian buy signal is still far off. Such a signal requires two conditions: a "capitulation" by bullish investors and significant downward revisions to GDP and earnings forecasts. A key technical buy trigger, the BofA Global Breadth Rule, would activate only when 88% of global equity indices fall below their 50-day and 200-day moving averages. The S&P 500 itself still has to fall nearly 100 more points to reach the 6300 level, which would mark an official 10% correction.
Hartnett Favors Consumer Stocks and Gold for "Policy Panic" Scenario
Looking ahead, Hartnett's base case is that governments will induce "policy panic" to avert a recession. He anticipates a post-war policy pivot from the Trump administration to address consumer affordability issues, making U.S. consumer stocks a favored contrarian long position. This view comes as investors pull back from equities, with U.S. stock funds recording their largest outflow in 13 weeks at $23.6 billion.
Longer term, Hartnett anticipates a structural bear market for the U.S. dollar, driven by a potential erosion of presidential credibility. This scenario would, in turn, restart bull markets for gold and international stocks. He recommends long positions in yield-curve steepeners and consumer-related assets as the primary ways to trade the expected policy response.
