BofA has placed its bets on recent market leaders following the sell-off. It is expecting a reversal.

Bank of America’s trading division advised clients to buy so-called momentum stocks, according to Bloomberg. These stocks had been outperforming the market until recently, but their prices have fallen sharply over the past month: a basket of them compiled by BofA has lost more than 10% from its June peak. Traders view current prices as attractive and believe the sell-off is nearing its end.

“Judging by historical data—seasonality, the nature of previous position liquidations, and the dynamics following sharp pullbacks—this appears to be a protracted profit-taking phase rather than a structural shift. That said, a reversal may be imminent. The current decline appears to present a good opportunity to enter the market in the near term,” according to a note to BofA clients cited by Bloomberg. According to the bank, following comparable sell-offs in the past, the basket has, on average, gained 5% over the following month.

In the third quarter, stocks typically hit bottom toward the end of July, and the recovery in prices often coincided with the peak of earnings season, the bank noted. At the same time, the basket has posted its best results over the past decade specifically in August. According to Bloomberg, the basket currently includes, among others, shares of SanDisk, Micron Technology, Danaher, Coinbase, and AMD.

BofA’s trading division recommends that clients bet on the rise of one of two indices—the US High Momentum or the US TMT High Momentum—through swaps or August call options. “If events continue as they have been, the main price gains will occur toward the end of the month,” the traders wrote.

UBS also sees signs that the share prices of recent market leaders have neared their lows, Bloomberg notes. According to traders at Switzerland’s largest bank, investors may already be returning to stocks of artificial intelligence companies and chipmakers.

JPMorgan Chase CEO Jamie Dimon said this week in an interview with TV host Wilfred Frost that he does not consider the broader U.S. stock market a clear entry point and is not ready to make major investments at current prices. However, Dimon did not go so far as to say that U.S. stocks are overvalued: further growth in corporate earnings could eventually justify current valuations.

The banker himself hasn’t bought any stocks recently and, rather than treating the S&P 500 as a single asset, prefers to consider the stocks of individual companies. The head of JPMorgan left open the possibility of making selective purchases “right now”: “If you came to me and said this was a great investment, I would consider it.”

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