Bank of America Warns of Internet Bubble-Like Divergence Signals in US Stocks
Bank of America pointed out that the volatility of individual stocks in the US stock market continues to rise, while the overall index volatility remains relatively stable, showing a divergence phenomenon that warrants caution.
The volatility index for S&P 500 components, VIXEQ, is around 50 points, up about 46% this year; VIX is about 16 points, up only about 13% this year, with the gap between the two widening to a historic high.
Similar divergences occurred before the burst of the internet bubble, and Bank of America believes that the actual volatility of individual stocks has returned to levels seen at that time, indicating a real risk of market shocks.
Source: Public Information
ABAB AI Insight
Bank of America has previously issued multiple warnings about market structure, and this time focuses on volatility divergence, reflecting its ongoing tracking of concentration risks driven by technology.
The institutional analysis team captures the high volatility of individual stocks caused by capital rotation within tech stocks through CBOE data, while passive investment in indices amplifies this divergence, aiming to alert investors to the accumulation of implicit risks.
Similar to the decoupling of individual stocks and indices around the time of the internet bubble in 2000, the current US stock market is in the late stage of AI-driven high valuation expansion, with seasonal weakness further amplifying the potential for shocks.
This essentially represents capital concentration, where a few tech giants dominate the index while individual stock divergence intensifies, leading to increased systemic fragility; once triggered, events will accelerate valuation repricing and capital outflows.
ABAB News · Law of Cognition
Calm indices often mask storms in individual stocks.
Volatility divergence is a precursor to bubble bursts.
Easy to concentrate profits, difficult to diversify risks.