The S&P 500 is on the verge of signaling a sell signal, BofA warned. What does he advise to do?

The record growth of the S&P 500 index has brought it close to a level that could signal a selloff, Bank of America strategist Michael Hartnett said. In his view, the market is facing growing bubble risks, especially after the passage of Trump's "great and wonderful" tax and budget bill. Goldman earlier predicted the S&P 500 rally could extend into July but slow in August.

BofA analyst Michael Hartnett advised investors to start taking profits if the S&P 500 Index exceeds the 6,300-point mark - just 0.3 percent above Thursday's close, reported Bloomberg.

Hartnett, in a note to investors warned of growing bubble risks amid the summer rally and the approval in the House of Representatives of a $3.4 trillion budget package of tax cuts.

"Overbought markets can stay overbought, because greed is harder to overcome than fear," Hartnett wrote in a Bloomberg statement.

On Thursday, the S&P 500 closed at 6,279 points, a new all-time high. The Nasdaq Composite also closed at record highs, reaching 20,601 points.

U.S. stocks hit all-time highs amid signs that the U.S. economy is resilient: for example, the number of U.S. jobs in June unexpectedly increased more than market participants expected, and the unemployment rate fell. The strong labor market is acting as an impediment to interest rate cuts, which could give the Fed a reason to hold off on resuming them until at least September. Statistical data once again fueled speculative market sentiment: technology giants are back in vogue, and interest in artificial intelligence has intensified, Bloomberg writes.

Trade policy remains a focus for investors, with a delay in imposing high duties set to expire on July 9. U.S. President Donald Trump announced that his administration will start sending letters to trading partners with notifications of unilateral customs rates on U.S. imports as early as Friday. Against this backdrop, U.S. stock futures were declining on the morning of July 4. The main stock exchanges are closed in connection with the Independence Day celebrations.

Goldman Sachs wrote in a July 1 note that after the S&P 500 Index rallied nearly 25% from its April lows, the rally would last a few more weeks and slow in August. The first two weeks of July are traditionally the best period of the year for the stock market, with the S&P 500's average return over the past 10 years of 2.4% between July 1 and July 15, the bank calculated. According to its estimation, in the nearest month global inflow of funds into shares in the amount of up to $80 bln is possible. However, according to analysts of the bank, in August the rally may lose momentum, therefore they recommend clients to hedge their positions through options.

JPMorgan's trading team wrote on June 30 that it too expects the rally to continue in the near term.

"We believe markets have entered a bullish phase and are expecting a wave of new all-time highs - especially as the budget, tax and trade agreements become clearer before the start of the corporate reporting season, where expectations are still clearly subdued," the analysts said. In their view, the financial and technology sectors "could pull the market up throughout the reporting season." And the release of Nvidia's results before Labor Day on September 1 "should further encourage investors for the fourth quarter."

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