Bank of America Merrill Lynch strategists are expressing an increasingly common sentiment on Wall Street — still on board the stock market train but increasingly skeptical about what's fueling the run.
In that environment, BofAML recommends high-quality bonds and financial stocks as outperformers.
"Investors may be well served by locking in some profits in U.S. stocks," BofAML said in a note.
The firm told clients this week that of the three pillars holding up the most recent leg of the eight-year bull market, two are wobbling. Only low bond yields, which are barely above the dividend yield of the S&P 500, are still in place.
The other two — accommodative central bank policies and earnings growth — are fading.
The former is obvious, with the U.S. Federal Reserve and its global counterparts slowly reversing the ultra-low interest rates and ultra-high liquidity programs they had put in place after the financial crisis.
But the latter is less apparent, particularly considering corporate America is in the middle of another solid earnings season.
BofAML strategists see cracks in the profit picture. Gains ahead are projected to slow, with equity and quant strategist Savita Subramanian expecting S&P 500 bottom-line growth to decelerate to 8 percent in 2017 and 5 percent in 2018.