Bank of America Warns of Warning Signals Similar to the Internet Bubble in U.S. Stocks

Bank of America has stated that the current U.S. stock market is showing signals similar to those seen during the internet bubble, indicating a new "shock risk" for the market. The bank pointed out that individual stock volatility is continuously rising, while the overall market index volatility remains stable, with ongoing capital rotation within technology stocks. A report from the Chicago Options Exchange indicates that the gap between the S&P 500 component stock volatility index (VIXEQ) and the VIX volatility index has widened to a historic high. VIXEQ is around 50 points, up about 46% this year; VIX is around 16 points, having risen only about 13%. Bank of America's global equity derivatives research team noted that similar divergence phenomena were observed just before the internet bubble burst, with individual stock actual volatility indicators having returned to levels seen at that time. Analysts pointed out that the gap between individual stock and index volatility is approaching extreme levels seen during the internet bubble, indicating that the risk of market shocks is real. If stock prices rise and valuations enter a bubble zone, this divergence could exceed that of the internet bubble period. Additionally, Bank of America warns that the U.S. stock market is entering a seasonally weaker performance phase, with historical data showing that the period from May to October is typically the weakest six months for U.S. stocks.

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