Yeliz Atmaca 
Bank of America believes the stock market rally in 2025 has ended. Chief strategist Michael Hartnett says the market is now trading sideways. Investors’ cautious moves support this claim.
Bank of America Market Analysis
In a note dated May 8, Michael Hartnett stated that the rally surged in the second quarter due to tariff optimism. However, this recovery has now ended. Investors are following a “buy the rumor, sell the fact” strategy. Although the S&P 500 rose 14% after Trump’s tariff pause announcement on April 9, it is down 3.7% for the year.
Hartnett believes U.S. stocks are in a “late-stage structural bear market.” For this reason, he recommends bonds and international markets over stocks. Foreign markets are outperforming the U.S.
Bank of America Data and Investor Movements
Bank of America’s data shows that $24.8 billion has flowed out of U.S. stocks over the past four weeks. This figure, sourced from EPFR Global, marks the largest outflow in two years. Investors are uncertain about the market’s future. This aligns with Hartnett’s warning that the rally is over.
Still, there are some market movements. Trump’s consideration of tariff cuts during weekend talks with China sparked a short-term rise in indices. The Dow Jones rose 0.6%, the S&P 500 gained 0.6%, and the Nasdaq climbed 1.1%. However, futures remained nearly flat on Friday morning.
Trump announced a trade framework with the UK. This is the first deal under the U.S.’s “reciprocal tariff” policy. The UK faces a 10% base tariff. Chris Zaccarelli of Northlight Asset Management calls this deal a “test run.” Agreements with China and other major trade partners will be more critical.
Meanwhile, Trump’s optimism about China talks has* sparked market activity. However, investors remain cautious. Large bets are not being placed in futures. The S&P 500 is set to close the week with a 0.4% loss. The Nasdaq is down 0.3%, while the Dow is up 0.1%, marking its third positive week.
The market is awaiting the outcome of Trump’s China talks. Reuters reports that tariff negotiations with China are at a critical stage this weekend. If a deal is reached, it could spark new market activity. According to The Wall Street Journal, investors are avoiding risks due to long-term uncertainties.
In conclusion, Bank of America’s warning and investors’ cash withdrawals indicate that the stock market rally has stalled. Hartnett’s recommendation to shift to bonds and international markets may offer investors a new roadmap.
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