This story is available exclusively to Insider subscribers. Become an Insider and start reading now.
As stock indexes sit near record highs, Wall Street s biggest banks say future returns look dim.
Goldman Sachs, Morgan Stanley, and BofA strategists aren t bullish on the S&P 500 in the near term.
They share nine areas of the markets where investors can find the best opportunities.
Stocks continue to reach new highs as the economy begins to reopen with more than 40% of the US population vaccinated against COVID-19.
But investors shouldn t expect to continue seeing the returns they have over the past year, some of the biggest investment banks on Wall Street say.
Bank of America s bull and bear sentiment indicator is currently neutral with a 7.1 rating.
The firm s chief investment strategist analyzed the bull and bear market cases to understand how investors should position.
He shares the 3 ways, including making the pain trade , for a tougher market environment.
Bank of America s bull and bear indicator, a measure of market sentiment, moved lower last week, showing how investors are a little less euphoric than they have been of late.
At a 7.1 rating, the indicator is down from its most recent high in February of 7.7. At this point, the rating was extremely close to triggering a sell warning, which was an indication that the market is extremely bullish.
10-year Treasury yields have risen to their highest levels since before the pandemic in recent days.
James McDonald, CIO at Hercules Investments, told Insider he expects yields to continue rising.
He said they could rise to 2.5% by the end of March and trigger a 20% sell-off in the S&P 500.
Yields on 10-year Treasury notes have spiked to a one-year high over the last month, rising above 1.5% as COVID-19 cases fall and vaccinations continue positive developments for the economic recovery ahead.
According to James McDonald, chief investment officer of the alternative asset manager Hercules Investments, the bleeding isn t likely to stop anytime in the coming weeks.
REUTERS/Luke MacGregor This story is available exclusively to Insider subscribers. Become an Insider and start reading now.
Economist David Rosenberg is warning that the S&P 500 is due for lackluster returns this year.
He said the S&P 500 s most expensive stocks could see a median 30% drop, like in the dot-com bubble.
He laid out in several charts how extreme investor euphoria has become.
Investor euphoria has seemed to reach a particular level of bizarreness this year.
Stock indices are at all-time-highs despite an uneven economic recovery and the risk that new strains of COVID-19 may prolong the global pandemic.
Heidi Gutman / CNBC This story is available exclusively to Insider subscribers. Become an Insider and start reading now.
In an exclusive interview with Insider, Ray Dalio said he expects a period of weak returns in stocks.
He said low interest rates are fueling a bubble that will eventually burst.
Major Wall Street banks are bullish on the direction of equity markets, however.
With the Federal Reserve pinning down interest rates, return-hungry investors have turned to stocks for the income bonds would have provided in a different era. But with all of this appreciation in stocks, little upside potential remains, according to legendary investor Ray Dalio.