Bank of America (BAC, Financial) cautioned that stocks may face a deeper correction, but rising cash levels could signal a buying opportunity for S&P 500 (SP500) exposure at 5,300.
The S&P 500 closed at 5,585.29 on Thursday, marking a correction. Based on historical trends, Bank of America (BofA) expects the index could drop further to 5,268 before stabilizing.
“Sentiment, positioning, and price signals suggest the equity correction isn't quite over,” said BofA Chief Investment Strategist Michael Hartnett in the firm's Flow Show note. He advised buying the S&P 500 at 5,300 once BofA's Fund Manager Survey (FMS) cash levels exceed 4%, high-yield spreads approach 400 basis points, and equity outflows accelerate.
Currently, cash levels stand at 3.5%. If they rise to 4.1% in BofA's upcoming March 18 survey, Hartnett said the “sell signal” would likely end, indicating the correction is nearing its bottom.
A decline to 5,300 would represent a 4% pullback from Thursday's close. This marks Wall Street's first correction since 2023.
