Bank of America lays out the scenario for the next big selloff — and it hinges on one key thing


There’s an old saying that “cash is king.” And judging by Bank of America Merrill Lynch’s latest forecast, that may very well be true for the market right now.

Michael Hartnett, BAML’s chief investment strategist, says conditions are ripe for a sell off, with one major caveat — investor cash levels have to fall below a key threshold first.

Beyond that, all the classic signs of overexuberance are present, according to the firm’s latest monthly fund-manager survey, which includes 223 panelists who manage $643 billion.

First off, 80% of respondents say equities have yet to peak, which is troublesome considering most of Wall Street thinks we’ve already entered the final stage of the current cycle. Secondly, and by that same token, only 8% of those surveyed see a recession in the next 12 months. Third, one-third of fund managers think companies are carrying too much debt, the highest percentage since 2009.

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