S&P 500 Hits New Highs Amid Extreme Divergence, Bank of America Warns US Stock Market May Be Approaching Late-Stage Bubble Territory

Odaily Planet Daily News The S&P 500 index hit a record closing high on the last trading day of May, but only a handful of its constituent stocks simultaneously reached new all-time highs, mostly concentrated in the AI-related sector, raising concerns about structural imbalances in the market. Analysts point out that despite the index continuing to hit new highs, the rally is concentrated among a few heavyweight tech stocks, with market divergence approaching historically extreme levels, potentially signaling the accumulation of underlying risks.

Data shows that on Friday, only 20 S&P 500 constituents hit new all-time highs, of which only seven had no direct connection to artificial intelligence. Bank of America strategist Michael Hartnett noted that this phenomenon bears a strong resemblance to the peak of the internet bubble in 2000, when similarly only about 20 stocks set new highs.

In his latest report, Hartnett warned that speculative sentiment in the market persists, but against the backdrop of high interest rates and tightening policies by global central banks, a market turning point may be approaching. He advised investors to gradually shift towards defensive asset allocations.

The May stock market rally was primarily driven by the semiconductor sector, with Micron Technology surging 87.8%, Advanced Micro Devices up 45.6%, Samsung rising 43%, and SK Hynix climbing 81%. This propelled the Nasdaq index to a cumulative gain of 25% in April and May, marking its best two-month performance in over two decades.