Bank of America drops shock message on the stock market

The stock market appears to be in the middle of a reset, but Bank of America feels investors shouldn’t expect a major rebound just yet. 

BofA’s chief investment strategist, Michael Hartnett, argues that the conditions that usually signal the end of a brutal market correction are only partially in place, per reporting from Seeking Alpha.

Hartnett said the current turbulence in the stock market follows a familiar pattern, where we’re seeing corrections led by “exogenous shocks at a time of excess bullishness.”

In other words, markets became incredibly optimistic, only for external events such as the Iran war to rattle investor sentiment, triggering a broad reset.

Here’s how the major stock indices have fared over the past week.

S&P 500:6,878.88 to 6,740.02, down about 2.0%Dow Jones Industrial Average:48,977.92 to  47,501.55, down about 3%Nasdaq Composite: 22,668.21 to 22,387.68, down about 1.2%.
Source: Reuters

The S&P 500 was last trading at 6,740.02 on Friday, March 6, 2026, according to the Associated Press, down roughly 1.5% year to date. 

For perspective, when I last covered the S&P 500 on March 2, 2026, it closed at 6,881.62; since then, it has fallen 141.60 points, or about 2.1%.

The primary focus on that piece covering Morgan Stanley’s Mike Wilson was “dispersion,” the idea that the S&P 500 can appear stable even as many of the stocks beneath the surface have crashed.

That said, it overlaps with Hartnett’s point that the market’s fundamentalsare undergoing a reset. 

Harnett believes a few critical pieces of the reset are now being seen in the current price action. 

However, the final piece of the puzzle still hasn’t appeared.  

From a historical standpoint, these resets tend to end after safe-haven assets such as oil and the U.S. dollar weaken, but he says the markets have yet to see it come to fruition.

Until that happens, Hartnett argues that investors shouldn’t expect “big trading upside.”

S&P 500 year-end closes (2020-2025)2020: 3,756.07 year-end close; up 16.3% for the year versus 3,230.78 at the end of 20192021: 4,766.18 year-end close; up 26.9% for the year2022: 3,839.50 year-end close; down 19.4% for the year2023: 4,769.83 year-end close; up 24.2% for the year2024: 5,881.63 year-end close; up 23.3% for the year2025: 6,845.50 year-end close; up 16.4% for the year
Source: S&P 500 closing levels via FRED/S&P Dow Jones Indices and YCharts historical data
A rotation beneath the surface of the stock market

Hartnett’s thesis on the stock market hinges on a market rotation that develops during corrections. 

That’s usually when money flows away from crowded winners and toward assets that have absorbed the bulk of the damage. 

He argues that the heavily sold areas of the stock market are already bottoming out. It points to a part of the tech space and risk-heavy assets that experienced major drawdowns in recent months.

Related: Morgan Stanley delivers curt 2-word verdict on S&P 500

“The first condition is when the ‘oversold’ assets trough,” Hartnett wrote, laying out the case that the process might have already been underway across software stocks, large-cap tech giants, and the “Magnificent 7,” along with areas like private credit, bank loans, and even bitcoin.

So the areas of the market that were out of favor have already taken the majority of their licks. 

At the same time, we’re seeing a completely opposite dynamic start to play out elsewhere.  

Assets that investors were flocking toward in droves during the recent rally are seeing investors step back.  

Hartnett underscored the recent selling pressure across gold and chip stocks, along with emerging-market, European, and banking stocks, reflecting a broader rebalancing across portfolios after the recent bout of choppiness.

“The second condition is met when the ‘overbought’ assets sell,” Hartnett explained.

Put simply, he argues that capital continues rotating across asset classes with investors unwinding positions that became stretched during the previous rally.

Overbought trades begin to unwind across key asset classesSPDR Gold Shares ETF (GLD): down nearly 2.1%
The SPDR Gold Shares ETF, tracking the price of the shiny yellow metal, dropped from around $483.75 on Feb. 27 to $473.51 on Mar. 6, a decline of nearly 2.12%. VanEck Semiconductor ETF (SMH): down about 6.4%
The VanEck Semiconductor ETF, which gauges the chip space, dropped from $406.37 on Feb. 27 to $380.56 on Mar. 6, a decline of nearly 6.35%. iShares MSCI Emerging Markets ETF (EEM): down about 8.4%
The iShares MSCI Emerging Markets ETF, which tracks stocks across major emerging economies, slid from $62.58 on Feb. 27 to $57.32 on Mar. 6, a drop of about 8.41%.Vanguard FTSE Europe ETF (VGK): down about 6.3%
The Vanguard FTSE Europe ETF moved from $90.17 on Feb. 27 to $84.46 on Mar. 6, a drop of roughly 6.33%.SPDR S&P Bank ETF (KBE): down about 2.5%
The SPDR S&P Bank ETF, tracking a basket of major U.S. banking stocks, declined from $61.05 on Feb. 27 to $59.55 on Mar. 6, a weekly drop of approximately 2.46%.
Source: Yahoo Finance

Related: Morgan Stanley drops blunt reality check on gold price surge

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