The S&P 500 and Dow Jones Industrial Average have both achieved new intraday and closing record highs, with year-to-date gains of 13% and 12%, respectively. This upward trend has occurred alongside ongoing conflicts, such as the U.S.-Iran war, and significant increases in oil prices.
Stocks associated with artificial intelligence have notably outperformed, but Bank of America's derivatives research team, led by strategist Arjun Goyal, questions whether these companies can maintain their momentum or if other sectors will take over.
Goyal highlighted that while the Cboe Volatility Index closed below 15 as the S&P reached all-time highs, there are signs of bubble-like price actions in the market. He noted that volatility in S&P 500 options increased sharply last week, indicating potential risks.
The technology sector, which includes many AI-related stocks, has risen 22% in 2026, making it the second-best performing sector after energy, which has surged 34%. However, over the past three months, there has been a noticeable shift towards healthcare and financials, which have gained 18% and 13%, respectively, while tech has only increased by 5%.
This raises questions for investors about whether this shift will continue and its potential impact on the broader market. Despite the uncertainties, Goyal recommends maintaining exposure to equities through S&P 500 call options, specifically the 7,900 strike calls expiring in September