Bank of America (BofA) has indicated that the S&P 500 faces increased downside risk in the coming months, as U.S. stocks may experience elevated volatility. BofA strategists noted that since April 2024, cyclical stocks linked to economic growth have been underperforming compared to defensive stocks, suggesting a shift in investor sentiment towards more stable investments. Despite these concerns, BofA's analysis suggests that a full-fledged bear market is unlikely at this time, with only 50% of typical signals triggering, compared to an average of 70% before market peaks. Additionally, sentiment has shifted from deeply negative in 2023 to neutral, with current optimism primarily centered around technology and artificial intelligence sectors rather than the broader market. Encouraging signs have also emerged, as mentions of weak demand during earnings calls have decreased to the lowest level since the third quarter of 2022. Furthermore, BofA reported that the Global Wave and Global Earnings Cycle continue to strengthen.