3 Sectors to Buy Stocks in and One 'Value Trap' to Avoid: BofA

Strong earnings and weak alternatives to stocks have driven markets to record highs, but a litany of risks threaten the market, a team of Bank of America strategists led by Savita Subramanian wrote in an August 13 note.S&P 500 forward earnings are up 27% this year, and second-quarter earnings have shattered expectations, while rising 90% year over year, according to Bank of America.Stocks steadily rose as bond yields cratered in the first half of 2021, which led investors to conclude that "there is no alternative" (TINA) to equities, especially since the S&P 500's "The market today is statistically expensive on almost every measure of the 20 metrics we track, except on growth and relative to bonds," Subramanian wrote.But investors itching to sell should be cautious, as stocks have defied gravity for years and long traded at ambitious earnings multiples.That's because valuations have historically been a terrible timing mechanism for markets, Chris Meredith, the co-chief investment officer of O'Shaughnessy Asset Management, a quantitative asset manager with $6.5 billion in assets under management, said in a recent interview with Insider.Lofty valuations alone won't cripple stocks, but Bank of America said interest rates could.