Bank of America (BofA) is telling investors to stay bullish despite record-breaking levels on Wall Street, saying that buying the S&P 500 at all-time highs has historically not penalized returns — and has often delivered a “meaningful boost” five years later.
In its latest RIC Outlook, the bank noted that while buying at peaks “may feel like a mistake,” data from the past 50 years show no statistical downside. Instead, investors who ignored negative sentiment and focused on hard economic data have consistently been rewarded.
“The best reason to stay bullish into year-end is that so many consumers, lenders, and companies are bearish,” BofA wrote. The bank pointed to a persistent gap between sentiment and real activity, arguing that pessimism itself could fuel continued market strength.
BofA’s analysis showed that in September, “soft data” indicators — like ISM new orders and consumer confidence — fell 0.5 standard deviations below average, while “hard data” metrics such as employment and spending stayed 0.3 standard deviations above average.
The bank also noted that US households hold the most cash since 1991, while existing home sales are at levels last seen during the Global Financial Crisis, a setup it compared to the mid-1980s, when falling rates sparked a housing rebound and a major equity rally.
BofA’s base case for Q4 2025 sees the 10-year Treasury yield at 4% and the Fed rate at 3.9%, implying a soft-landing scenario that could keep risk assets supported.
Despite headlines warning of overvaluation, BofA’s message is clear — history shows that buying stocks at record highs isn’t risky, it’s often the start of the next leg higher.
Disclosure: This article does not represent investment advice. The content and materials featured on this page are for educational purposes only.
