BofA has found frightening similarities between the current US market and the dot-com peak. What does he advise?

The situation at the last close of trading on the US stock market resembles what happened at the peak of the dot-com bubble 26 years ago, Bank of America has pointed out. The S&P 500 index ended Ma at a record level of 7,580 points, but its own historic highs were updated shares of only a small group of companies, mostly in one way or another related to AI. These include Dell, Micron, SanDisk, Apple, Qualcomm, Cisco and CrowdStrike.

Shares of just 20 companies in the S&P 500 broad market index reached a personal record on May 29. Of those, only seven were not directly related to artificial intelligence. Bank of America strategist Michael Hartnett recalled in a note quoted by CNBC that at the peak of the Internet bubble in March 2000, only 20 stocks were also hitting highs.

Now, more strategists and investors fear that if this bull market doesn't start to expand, it is its narrowness that will eventually cause a reversal, CNBC notes.

According to Hartnett, "speculative price dynamics" is probably not exhausted yet, but such a signal indicates that the market is approaching its final stage. The BofA strategist predicts that such growth will end when central banks raise interest rates, and suggests clients switch to a defensive strategy in the near future.

"The roadmap for investors after bubbles since 1929 is long positions in long-term bonds and a combination of defensive sectors and/or those sectors that lagged sharply in the final months of the bubble," Hartnett wrote.

The May stock market boom was largely driven by semiconductor companies, especially memory makers Micron Technology, Advanced Micro Devices, SK Hynix and Samsung. The capitalization of these players is about $1 trillion or close to this level. Over the month, AMD quotes soared by 46%, Micron - by 88%, Samsung - by 44%, and SK Hynix - by 81%. The Nasdaq Composite Technology Index jumped 25% in April and May, marking the best two-month gain in more than two decades.

The S&P 500 index rose 5.2% in May, showing the second best monthly result of the year: in April it added 10.4%. But this should not be misleading: May was not so successful for the broad stock market, MarketWatch writes. Of the 11 key sectors of the S&P 500, only three grew during this period: information technology, health care and the consumer non-essential goods and services sector. The weakest sectors were energy and utilities, both down more than 5%. They were followed by the consumer staples sector, which lost just over 1%.

This article was AI-translated and verified by a human editor