(Bloomberg) — There’s growing “suspicion” among investors about the scope for more S&P 500 gains at a time when European and Chinese stocks are outperforming, according to Bank of America Corp. (BAC) strategist Michael Hartnett.
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“The longer it takes and the harder it is for the S&P (^GSPC) to get to new highs, the doubts grow,” Hartnett said in an interview on Bloomberg TV. “Europe’s working, China’s working, even bonds in America are starting to work.”
The strategist has recommended international equities over US peers this year as he expects the so-called Magnificent Seven technology stocks to wobble after driving the US rally since the start of 2023.
While he said investors are far from pessimistic about big tech, these stocks are vulnerable to declines if the trade “doesn’t keep working.”
US stocks have trailed global peers this year as investors questioned lofty valuations and hefty spending on artificial intelligence. The S&P 500 is up less than 2% in 2025, while a basket of the Magnificent Seven stocks has fallen 3.3%. By contrast, the MSCI All-Country World Index excluding the US has rallied 7%.
Hartnett said investors are likely to look for fiscal intervention from the Trump administration if the S&P 500 were to drop to 5,600-5,700 points — a decline of as much as 6% from current levels.
“The stock market is his traffic light,” the strategist said, referring to US President Donald Trump.
—With assistance from Bre Bradham.
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