BofA warns of potential summer pullback in US stocks

Bank of America’s strategists say the S&P 500 has reached the firm’s 7,430 year‑end target and that technical indicators point to a higher risk of a pullback from June through September.

In a research note, they pointed to narrowing market breadth — fewer stocks lifting the benchmark — and divergence among momentum measures. The report noted the recent rebound, aided by easing tensions in the Middle East, has masked weakening internal market structure.

BofA’s base case calls for holding trend-following long positions through June. Beyond June, strategists flagged an elevated risk of a correction running June through September and recommended investors hedge exposure, lock in gains and add downside protections ahead of a seasonal liquidity decline.

The bank did not recommend exiting equities. The note advised a tactical approach that reduces portfolio vulnerability if markets rotate lower over the summer months.

Looking past the summer, Bank of America projects the S&P 500 will recover and rise to 8,000 by the end of 2026, a level that implies roughly 7% more upside from current prices. The research referenced historical performance in the second year of U.S. presidential cycles as part of the rationale for expecting a stronger finish in late 2026.

The note used the phrase ‘summer correction’ to describe the scenario and forecast a ‘meaningful’ recovery in the fourth quarter of 2026.