Recently, U.S. stocks have surged, with the Nasdaq hitting new highs, but Michael Hartnett, Chief Investment Strategist at Bank of America, stated that all of the bank's proprietary trading rules have triggered sell signals, and the market may face a correction. The stock market, which has been rising for the past few weeks, has now reached critical technical thresholds, with multiple indicators showing that risks are accumulating.In his latest report, &#34;Flow Show,&#34; Hartnett pointed out that the cash rules from the Bank of America fund manager survey, global breadth rules, and global fund flow trading rules have all issued sell signals. Among them, the proportion of cash held by fund managers relative to assets under management has dropped to 3.9%, reaching a sell signal level. Historical data shows that after such signals are triggered, the S&amp;P 500 index averages a decline of 2%.However, it is noteworthy that Hartnett believes the real trigger for a sell-off may not be in the stock market, but in the bond market. Once the 30-year U.S. Treasury yield breaks above 5% and hits new highs, with volatility soaring, market sentiment will shift from &#34;risk appetite&#34; to &#34;risk aversion.&#34; Meanwhile, underlying concerns are hidden behind the rise of U.S. stocks—market breadth has reached historical lows, and signs of economic slowdown are emerging.A larger variable is Trump's interference in the relationship between the White House and the Federal Reserve, which could lead to a policy disaster reminiscent of the 1970s.<h2>Three Major Sell Signals Triggered Simultaneously</h2>Hartnett stated that the results of the monthly &#34;Fund Manager Survey&#34; he released earlier this week show that after Wall Street experienced a wave of panic selling three months ago, market sentiment has undergone a record bullish reversal, and fund managers' risk appetite has reached unprecedented highs.<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/e689f868-22b3-495e-b815-e37608999a1e.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/e689f868-22b3-495e-b815-e37608999a1e.png"/>However, in Bank of America's proprietary trading system, three key indicators have all reached sell thresholds.<blockquote>The proportion of cash held by institutional investors relative to assets under management has dropped to 3.9%, triggering a sell signal. In the 15 similar signals since 2011, the S&amp;P 500 index subsequently averaged a decline of 2%.Regarding global breadth rules, the proportion of stocks in the MSCI global index trading above their 50-day and 200-day moving averages is 64%, down from 80% last week, below the 88% sell signal level.Global fund flow trading rules indicate that over the past four weeks, the inflow of funds into global stocks and high-yield bonds has accounted for 0.9% of assets under management, down from 1.0% last week, triggering a sell signal.</blockquote>The simultaneous triggering of these technical indicators is relatively rare in Hartnett's analytical framework and typically signals that the market will undergo directional adjustments.<h2>Bond Market as a Key Risk Point</h2>Hartnett emphasized that the bond market, rather than the stock market, may become the trigger for the next round of adjustments. The volatility in the bond market often precedes adjustments in the stock market, making it a key leading indicator.**The 30-year U.S. Treasury yield briefly surpassed 5% again this week, particularly amid market panic over concerns that Trump might fire Powell.Currently, the 30-year bond yield is approaching &#34;breakthrough&#34; levels, with the UK at 5.6%, the U.S. at 5.1%, and Japan at 3.2%. As yields have not yet reached new highs and the MOVE index remains around 80, the market still maintains a risk-on stance.<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/9662a1ee-6d15-44a0-9f20-35a8a8dc8555.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/9662a1ee-6d15-44a0-9f20-35a8a8dc8555.png"/>Once long-term bond yields reach new highs and the MOVE index rises above 100, Hartnett will shift to a risk-averse position.<h2>Market Breadth Deteriorates to Historical Extremes</h2>While the stock market hits new highs, market breadth is at historical lows. The equal-weighted S&amp;P 500 index is at a 22-year low relative to the S&amp;P 500, the small-cap Russell 2000 index is close to a 25-year low relative to the S&amp;P 500, and the value stock to growth stock ratio has reached a 30-year low.<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/ca5860a4-b7ee-4fe3-82e8-91e00e3bddd8.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/ca5860a4-b7ee-4fe3-82e8-91e00e3bddd8.png"/>This divergence indicates that the U.S. economy is slowing down or that U.S. stocks are in a bubble. In contrast, in the global stock markets where sentiment is more normalized, value stocks and small-cap stocks are outperforming large-cap stocks.<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/b162e356-8cbe-427e-bc5b-8694a834ad0b.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/b162e356-8cbe-427e-bc5b-8694a834ad0b.png"/>Hartnett believes this extreme market concentration reflects investors' excessive reliance on a few tech giants, while ignoring the widespread deterioration of economic fundamentals.<h2>Policy Conflicts of the 1970s Resurface</h2>The policy divergence between Trump and Powell regarding interest rate cuts reminds Hartnett of a historical replay from the early 1970s. On August 15, 1971, Nixon announced the &#34;New Economic Policy,&#34; ending the Bretton Woods system and implementing wage-price freezes and a 10% import tariff, at which time the unemployment rate was 6% and CPI was 4%.Then-Federal Reserve Chairman Arthur Burns significantly cut interest rates by 225 basis points from August to December, igniting a cycle of first prosperity, then collapse. The market initially fell, the dollar depreciated by 5%, the S&amp;P 500 index dropped by 9%, and U.S. Treasury yields fell by 70 basis points. However, a year later in 1972, the S&amp;P 500 index rose by 11%, and the dollar further depreciated by 8% before Nixon's re-election in November.<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/8a04ad28-0bb4-4292-bf8a-1418861b2d56.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/8a04ad28-0bb4-4292-bf8a-1418861b2d56.png"/>Based on this, Hartnett expects that if Powell is forced to resign, the market will repeat a similar policy cycle

Hartnett stated that the real trigger for a sell-off may not be in the stock market, but in the bond market. Once the 30-year U.S. Treasury yield breaks above 5% and hits a new high with soaring volatility, market sentiment will shift sharply from "risk appetite" to "risk aversion." Meanwhile, there are hidden concerns behind the rise of U.S. stocks—the market breadth has reached a historical low, and signs of economic slowdown are emerging. A larger variable is Trump's interference in the relationship between the White House and the Federal Reserve, which could potentially replay the policy disasters of the 1970s

- Michael Hartnett, Chief Investment Strategist at Bank of America, warns that all proprietary trading signals have triggered sell alerts, indicating a potential market correction.  
- Key indicators show that the cash ratio among fund managers has dropped to 3.9%, historically leading to an average 2% decline in the S&P 500, while the breadth of the market is at a historical low.  
- Hartnett suggests that the bond market, particularly if 30-year Treasury yields exceed 5%, may be the catalyst for a shift from risk appetite to risk aversion, echoing concerns reminiscent of the 1970s policy conflicts.

Bank of America Hartnett: Regarding the US stock market, all sell signals have been triggered, but…