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With signs of excessive speculation and high valuations in the equity markets, the current environment resembles a late-cycle bubble very “similar” to the dot-com boom in 2000, Bank of America says, forecasting a negative year for equities in 2022.

Important facts

“There are too many similarities between today and 1999/2000 to ignore,” said analysts around Savita Subramanian, head of US equity and quantitative strategy at Bank of America, in a recent statement.

The current structure of the market is very similar to what it was just before the internet tech bubble burst in the late 1990s, when stocks fell into a bear market from 2001, analysts said.

Some of the signs in the market today are arguably worse than they were in 2001, argued Bank of America, adding that signs of speculation were evident amid “growing acceptance of the unthinkable” among investors.

Given a number of increasingly worrying signs in today’s markets – including negative real rates, rising inflation, frantic IPOs, and liquidity risk – the Wall Street company is now forecasting a negative year for stocks to come.

Bank of America has set a target price of 4,600 for the S&P 500 next year, a 2% decrease from Monday’s closing price of 4,682.84.

Analysts from other major banks disagree on how the S&P 500 will perform next year: Morgan Stanley has an even lower price target for the index than Bank of America’s, while others like JPMorgan, Goldman Sachs and Wells Fargo all expect that stocks will rise slightly in 2022.