Bank of America strategist Michael Hartnett has issued a stark warning to equity investors, arguing that the current level of market optimism has reached a contrarian extreme.
Hartnett advises reducing exposure to stocks, suggesting that the widespread bullish sentiment is a signal to step back rather than chase further summer gains.
The strategist’s caution comes as positioning in US equities remains elevated, with few viable defensive alternatives available to global investors.
According to internal analysis, the sheer breadth of optimism is acting as a contrarian indicator, implying that the risk of a pullback is increasing as the summer trading season progresses.
This warning aligns with broader concerns about market valuation and positioning that have been circulating among major banks.
While the rally has persisted, the lack of clear defensive hedges leaves portfolios vulnerable to a sudden shift in sentiment.