BofA turns S&P 500 signals from red to yellow: What to buy now

Bank of America has updated its equity market signals, shifting the S&P 500 indicator from red to yellow as bear-market risks moderate. According to equity strategist Savita Subramanian, the share of triggered bear-market signposts dropped from 70% at the end of May to 60%, driven by improving credit conditions and a normalization in frothy tech sector price action. Despite the upgrade from warning levels, historical precedent indicates that when 60% of signposts are triggered, the median next-12-month return stands at a modest 3%. Valuation metrics have shown slight improvement, with the S&P 500 forward price-to-earnings multiple compressing from 22 times at the start of the year to 20 times, primarily because corporate earnings outpaced index price gains. However, Bank of America maintains caution over longer horizons, noting that its proprietary long-term model projects 3% annualized losses over the next decade. From a portfolio positioning perspective, BofA recommends large-cap value sectors to act as market ballast, highlighting oil and gas, metals and mining, distributors, banks, and insurance. Simultaneously, the bank advised investors to steer clear of value traps such as media and IT services.