Bank of America strategists say investor bullishness has reached extreme levels, and now is the time to start reducing exposure to risky assets. The team led by Michael Hartnett wrote in a report that the bank's Bull and Bear Index rose from 9.4 to 9.7, the highest level since 2021. They pointed out that the widening range of gains in the stock market, the massive inflow of capital into high-yield bonds, and the narrowing of credit spreads are the reasons behind investors' optimism. The team favors defensive assets, which they believe can help the portfolio withstand possible negative shocks in the economy, monetary policy, and artificial intelligence. Hartnett said, “We are still in the summer 'retraction/rotation' phase rather than 're-adding holders'.” He advised investors to reduce risk asset allocation or switch to some defensive assets, long-term assets, and the US dollar.

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