Bank of America flags tech bubble risk but tells clients not to sit out the rally

Bank of America has a message for investors nervous about the tech megacaps pushing the Nasdaq 100 to record highs: you can still join the party, as long as you book a ride home in advance. The bank’s strategists argue that equity derivatives offer a way to capture the rally while sidestepping the damage if it turns out to be a bubble. The bubble warning, by the numbers BofA analysts, with work on the theme led by Michael Hartnett, have been drawing comparisons between today’s AI-fueled market and the 2000 dot-com bubble. The bank’s Bubble Risk Indicator, or BRI, for the Nasdaq 100 and the broader tech sector has climbed to a range of 0.72 to 0.8. Higher readings mean the conditions that tend to precede corrections are building. The analysts say the current setup resembles the market roughly six months before the March 2000 dot-com peak. There is an important difference, though. Only 18 stocks in the S&P 500 scored above the 0.8 BRI threshold, and together they represent just 3.2% of the index weight. At the height of the dot-com boom, somewhere between 50 and 100 stocks cleared that bar. Why volatility is flashing late-1990s signals VIXEQ, a gauge tied to single-stock volatili...