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Equity Markets Face Pullback Risk as Valuations Stretch, BofA Warns

Bank of America strategists have cautioned that heightened profit-taking threatens U.S. equities in early June as investors reassess stretched valuations and inflation headwinds. The concentration of capital flowing into stocks has historically preceded market corrections, the firm said. Chinese equities also slipped recently as investors trimmed positions after technology-led rallies while monitoring geopolitical developments. Despite profit-taking pressures, corporate earnings remain robust enough to support equity positions, limiting downside risk from broader economic concerns. Bank of America noted U.S. stocks and gold are tracking toward a fourth consecutive year of double-digit gains—a rare occurrence in market history. The firm recommended selective positioning ahead of potential volatility, while acknowledging earnings strength continues to underpin valuations.