Bank of America is Telling Investors to Take Some Profits
The bank has been closely following upside price targets that were derived from price action around the end of 2020. Furthermore, February is historically one of the weakest months for the financial markets.
The bank used historical data going all the way back to 1928. According to the data, on average stocks see a decline of 0.11 percent in the month of February, with a median return of 0.27 percent.
Bank of America also sees activity in the options market as a potential indicator of a correction. The current put/calls ratio is showing that investors believe some of their gains are unjustified given current economic conditions. This is a common sign seen when the market peaks.
Lastly, the bank cited the lack of stocks above their 10-day and 50-day moving averages as a concern.
However, Bank of America is bullish on the markets for 2021 with a year-end price target of 4,000 for the S&P 500.
Regardless, with significant downside indicators, investors should "take some profits."