Warning from BofA: Identified Five Major Risks in Global Stock Markets

Analysis of Emerging Risks in Global Markets

The benchmark index of U.S. stocks, S&P 500, is preparing to close the year with double-digit gains once again. The significant impact of the rise of artificial intelligence stocks over the past three years on the sustainability of this bull market cannot be denied. However, analysts at Bank of America (BofA) are warning investors about the emergence of new and critical risks in the markets.

Overvaluation Signals

According to BofA analysts, the S&P 500 index appears overvalued in historical benchmarks. Stock valuations have surpassed even those during the tech bubble of the 1990s. Analysts emphasize warning signals such as high price-to-earnings ratios, the outperformance of expensive stocks compared to cheaper ones, and credit indicators. Chief Strategist Savita Subramanian points out that 70% of similar past signals resulted in market peaks, noting that currently 60% of these signals are present.

Consumer Resilience and AI Rally

Another concern raised by analysts is the risk that the AI rally could impact consumer spending. If there is a decline in AI-focused stocks, white-collar workers may face layoffs, which could weaken the overall resilience of the economy. In this context, there is a risk that consumer-oriented sectors may exhibit stagnant performance.

Relationship Between Big Companies and Private Equity

BofA analysts view the interaction between large companies and private equity, along with the U.S. government, as a critical risk area. While governmental purchases in the market have historically provided support to the markets, this new situation could create complex effects.

Increasing Macro Uncertainties

Economic uncertainty is also heightening risks. The escalation of U.S.-China trade tensions in October and the potential government shutdown are causing investors to remain directionless. This macro uncertainty, along with the suspension of economic data, could negatively impact the recovery of economic activity.

Alarm Signals in Credit Markets

Finally, issues in the private credit market are drawing attention. Legal troubles faced by some regional banks in the U.S. have brought credit concerns back to the forefront. BofA analysts indicate that despite banks reporting strong balance sheets, developments in lending could signal larger problems ahead.