As stocks pull back from all-time highs, a top Bank of America strategist warned investors to be cautious, citing a series of economic indicators that have historically signaled the end of a rally. Sebastian Raedler, head of European equity strategy at Bank of America, made his case for a bearish outlook, forecasting that the S & P 500 could sink a further 2.6% to 5,400 and European equities could slide by around 15%. “If you had a list of when you should be bearish, I would say it’s when markets are at all-time highs, risk premiums are at an all-time low, earnings and margins are already as high as they can be, and the U.S. macro cycle recovery is in its last innings,” Raedler said on CNBC’s “Squawk Box Europe” on Wednesday. The S & P 500 has hit more than 30 new all-time high records this year, closing as high as 5,667 last week before falling back. .SPX 5Y line Raedler also said the recent uptick in the unemployment rate, albeit from a very low level, was an “ominous” sign. “Historically, whenever the unemployment rate has started to rise, it has never gone down again. It was always the end of the business cycle,” Raedler explained. The unemployment rate unexpectedly climbed to 4.1% in June , tied for the highest level since October 2021. The forecast had been for the jobless rate to hold steady at 4%. Since April 2023, the unemployment rate has steadily increased by 70 basis points. The strategist added that such conditions typically lead to higher risk premiums and lower asset prices, especially given the current elevated market levels. “Be cautious here,” he advised. The risk premium is the return above the risk-free rate, typically the 10-year U.S. Treasury, demanded by investors to hold higher-risk assets such as equities. When risk premiums rise, share prices usually fall. Raedler also highlighted the increase in initial jobless claims, up 15% so far this year, and sliding hiring intentions among small to medium-sized companies. According to the strategist, these factors suggest that more labor market weakness is on the horizon. The joblessness rate is often inversely correlated with stock market returns over short periods. The Bank of America strategist also expressed concern about consumer confidence, which he described as “collapsing.” He noted that consumer confidence is typically a leading indicator for consumption and that current levels are “consistent with negative consumption growth.” The University of Michigan consumer sentiment survey released earlier this month showed a 7.7% drop in July from last year and a 3.2% drop month-on-month fall. The bullish view Hani Redha, portfolio manager at Pine Bridge Investments, held a more optimistic view. Redha cautioned against prematurely calling the end of the stock market rally, quoting legendary value investor Peter Lynch: “Far more money has been lost by investors preparing for corrections, or anticipating corrections, than has been lost in the corrections themselves.” You can watch the full bull vs. bear debate here: