[Global Times Finance Comprehensive Report] As the S&P 500 index approaches the 6000-point mark again, while the 10-year Treasury yield remains high, Bank of America Chief Investment Officer Michael Hartnett warns that the answer to whether U.S. stocks and other risk assets will break out or collapse lies within the three 'B' type assets: brokerage stocks, bank stocks, and Bitcoin.
In the latest Flow Show report, Hartnett stated that if these three major risk-leading assets form a double top pattern, it would release an 'extremely bearish' signal; if they can break upward, it would indicate 'extremely bullish' sentiment. Previously, Bank of America strategists recommended going long on long-term bonds, particularly 30-year treasuries, which subsequently rose. However, nearly all assets have recently surged, with the S&P 500 soaring 6% in May, marking the best May performance this century and since 1990.
In contrast to the rise of risk assets, the dollar's 'uptrend is weak.' Hartnett believes that a weak dollar could become a tool to promote the development of U.S. manufacturing, which accounts for only 8% of U.S. jobs.
In the face of changing market dynamics, both bulls and bears have begun to position themselves. Bears are allocating defensive healthcare, consumer staples, and utility stocks in preparation for a collapse, with these sectors currently accounting for only 18% of the S&P 500, marking the lowest level since 2000. Bulls, on the other hand, are adopting a barbell strategy of 'going long on the tech giants and other regional value stocks' to hedge against the risks of a bubble top in the U.S. market and excessive fiscal spending in the EU.
Capital flow data confirms the market's diverging sentiment. Cryptocurrency recorded an inflow of $2.6 billion this week, the largest single-week inflow since January; gold saw an inflow of $1.8 billion, with an annualized inflow reaching a record $75 billion; emerging market bonds recorded their largest inflow since January 2023 ($2.8 billion); global stocks experienced their largest outflow in 2025 ($9.5 billion); and Japanese stocks faced their largest outflow ever ($11.8 billion).
Although Hartnett suggests configuring a BIG portfolio (bonds, international stocks, gold) in 2025, he also acknowledges significant risks that U.S. policymakers may shift to a policy of 'creating larger bubbles' by lowering tariffs, cutting taxes, and reducing interest rates to stabilize the debt/GDP ratio.
Additionally, the tech giants performed strongly again, with the trading price-to-earnings ratio returning to 42 times. Historical data shows that stock market bubbles typically peak at a P/E ratio of 58 times and a 244% increase, suggesting that the tech giants still have 30% upside potential. However, it is worth noting that in the past 14 asset bubbles, 12 were accompanied by rising bond yields, and the current U.S. 30-year real interest rate is close to 3%, the highest level since November 2008.