Strategists at Bank of America-Merrill Lynch on Friday laid out their case in favour of a re-test of the S&P 500's recent lows, towards 2.534.
In a research note sent to clients on Thursday, the investment bank spelled out six reasons why it expected another $6.0trn correction in markets, including investor sentiment, as measured by their Bull&Bear indicator still at “very bullish” levels, and multiple indicators at levels indicative of a 'peak'.

Included among the latter were: 12-month forward projections for earnings per share to grow by over 20%, “booming” US consumer confidence, US unemployment at 4.1%, and the ISM factory sector index at 60.8.

“Buy humiliation & busts, sell hubris & booms,” they said.

To take note of, on the whiff of trade protectionism in the air, BofA-ML interpreted market pricing in its wake as “deflationary”, explaining that “yields down, stocks down…and stocks down may be necessary to stop escalation of trade war.”

The 'price action' in markets was telling a similar story, they held, pointing out how technology stocks were not making new highs, nor were credit spreads.

Homebuilders shares and the All World Index on the other hand were, with global stocks no longer running ahead of global government bonds.

“Trough in inflation, rates, volatility (all 9-year drivers of bull in corporate bonds & equities) now challenging bullish consensus.”