Bank of America warns: Defensive stocks "rise up from the bottom like salted fish" suggests that the US economy may not have a long-lasting "good time".

Last Friday, Bank of America stated that defensive consumer staples and healthcare stocks have recently outperformed other sectors of the US stock market, signaling a warning about the US economy. Data shows that the S&P 500 index has dropped by 0.6% in the past month, while consumer staples (XLP) and healthcare (XLV) stocks have risen by 6.8% and 2.6% respectively during the same period. These two categories of stocks have been the best-performing in the S&P 500 index in the past month. Bank of America suggests that the strong performance of defensive and bond-sensitive stocks is beginning to indicate a slowdown in economic activity, which could interrupt the stock market bull run. Strategist Michael Hartnett stated that there are risks such as "unexpected slowdown in real estate growth, weakening wealth effect and job growth, inflation affecting consumer confidence, and the US government falling into a recession." Michael Hartnett also noted that last year, the US federal government's discretionary spending increased by 65%, which was a "significant reason" for nominal GDP growth. Currently, the Trump administration is seeking significant spending cuts, which may include reductions in defense spending. He added that the risk of a slowdown in the US economy is greater than the risks of rising inflation and the stock market breaking out of its trading range, as President Trump is "unlikely" to "stoke" inflation in the first half of the year through large tariffs and cutting immigration.