U.S. Stocks Alert! A Sudden Warning Emerges!
Is the U.S. Stock Market Overheating?

Recently, Michael Hartnett, a renowned Bank of America analyst, warned that the risk of a bubble in the U.S. stock market is rising.

Hartnett, known as "Wall Street's Most Accurate Analyst," correctly predicted earlier this year that international markets would outperform U.S. stocks. In December, he cautioned that U.S. equities were beginning to show bubble-like conditions after a strong 2024 rally. Following his warning, the S&P 500 plunged 18% before rebounding in early April. In June, Hartnett reiterated that U.S. stocks could ultimately enter bubble territory amid expectations of interest rate cuts.

Top Analyst Warns of U.S. Market Risks

On July 25 (Beijing time), Bank of America strategist Hartnett stated that the risk of a stock market bubble is increasing as monetary policy and financial regulations loosen.

Hartnett’s team noted that global policy rates have dropped from 4.8% last year to 4.4%, driven by significant borrowing cost reductions by the Fed, Bank of England, and ECB. They forecast a further decline to 3.9% over the next 12 months.

Meanwhile, U.S. policymakers are considering regulatory reforms to boost retail investor participation. "The larger the retail investor base, the greater the liquidity, volatility, and potential for bubbles," Hartnett wrote in a report.

According to Bloomberg, despite higher tariffs, U.S. stocks recently surged to record highs on optimism about economic growth and corporate earnings. Bulls like Morgan Stanley’s Michael Wilson argue that strong earnings momentum, operating leverage, and tax savings justify the rally.

However, strategists at JPMorgan and UBS warned that markets may be too complacent about lingering trade risks. S&P 500 futures remained flat on Friday (July 25) as investors held back ahead of the Fed’s policy meeting next week.

HSBC economist Ryan Wang noted that the Fed will likely keep rates unchanged this month—marking its fifth consecutive pause—but divisions remain among policymakers. Additionally, Fed Chair Powell may face tough questions about central bank independence during his press conference.

On Thursday (July 24), U.S. President Trump clashed with Powell over the Fed’s headquarters renovation costs—the White House’s second public challenge to Fed independence this month. Analysts warn that sustained political pressure could undermine the dollar’s credibility as the global reserve currency.