JPMorgan turns cautious, BofA urges profit-taking as Wall Street grows wary after selloff

Major Wall Street institutions including JPMorgan Chase and Bank of America (BofA) have issued cautious outlooks after US stocks tumbled following a nine-week winning streak, Bloomberg reported Monday.

Andrew Tyler, head of global market intelligence at JPMorgan, downgraded his near-term market view from "bullish" to "tactically cautious" in a note to clients. He said short-term volatility is likely to persist, as investors may continue selling some of the technology shares that surged during the recent rally. "It may take a few weeks for the market to find its footing," he said.

Tyler nonetheless said economic fundamentals and corporate earnings continue to support a bull market, adding that he feels "comfortable buying the dip."

He flagged several risks — bond market volatility, position unwinding, potential pullbacks in AI-related shares and a rise in equity issuance — and cited the risk of an "imminent correction." Given those concerns, he advised clients that it is "reasonable to leg into a position over this week and next."

He added that a bearish case for equities could strengthen if consumer price data due this week pushes government bond yields higher ahead of the Federal Reserve's interest rate decision on June 17, or if disappointing earnings reignite selling in technology shares.

At the same time, Tyler left open the possibility of turning bullish again if a deal to end the war in the Middle East emerges and eases inflation concerns.

BofA Securities issued a more direct warning. The equity strategy team led by Savita Subramanian told clients in a note that there are "too many red flags" and advised investors to take profits.

About 70 percent of the bearish market signals BofA tracks have already been triggered — a level consistent with previous market peaks, the team said. The S&P 500 is statistically overvalued on 17 of 20 valuation metrics, and eight of those metrics show valuations exceeding even those seen during the dot-com bubble.

"Even if the index has room to climb further in the near term, locking in gains and holding cash offers a far more favorable risk-reward at this point than aggressively expanding positions," Subramanian said.

She also warned that "extreme price volatility in some mega-cap shares is a classic sign that the market's internal structure is becoming increasingly unstable," while adding that opportunities exist in individual stocks rather than the broader index.

Her year-end target for the S&P 500 stands at 7,100 — below Monday's closing level of 7,406.