How much longer can the US stock market frenzy last? Wealthy individuals are running out of cash, and market vulnerability is rising.

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Beneath the prosperous facade of the U.S. stock market, a potential vulnerability is accumulating: the influx of investment capital has largely been completed, and if the market turns, shocks on the consumer side may become unavoidable.

According to two closely watched surveys by Bank of America, institutional investors saw their largest cash allocation reduction in two years last month, while their stock allocation increase hit an all-time high, with cash accounting for only 3.9% of total assets. Meanwhile, among the over $4.5 trillion in private client assets managed by Bank of America—targeting wealthy individuals with investable assets of no less than $3 million—cash allocation has fallen below 10%, the lowest level since the survey began.

This trend reflects investors’ concentrated bets on inflation expectations: bonds’ appeal has decreased, while equities are seen as a more effective hedging tool. However, this massive migration of funds also means the liquidity buffer of wealthy groups has been significantly compressed.

The core issue lies in the fact that U.S. consumer spending relies substantially on support from the wealthiest segment. If the stock market comes under pressure, these individuals may be the first to tighten their wallets, thereby impacting overall consumption data and pushing the S&P 500 index into a more dangerous position—a fragile structure increasingly dependent on AI narratives rather than real cash flow support.

"K-shaped Economy" Risks: What Happens if the Wealthy Stop Spending?

The Bank of America survey reveals that wealthy individuals’ bond allocations have reached the lowest point on record, while institutional investors’ bond allocations have sunk to a four-year low. With inflation expectations rising, bonds’ appeal has clearly diminished, and holding large amounts of cash likewise cannot offset the erosion of purchasing power.

By contrast, equities provide a relatively effective inflation buffer—whether in scenarios where robust demand drives up prices, or situations where consumers can withstand higher prices, corporate revenues and profits are likely to remain resilient. This logic is fueling the continued flow of funds into equity assets.

However, this shift in allocations is a double-edged sword. When investors’ cash reserves are nearly depleted, the market’s buffer space in the face of shocks is likewise limited. Both institutions and wealthy individuals are heavily concentrated in their positions, leaving little room for further buying.

The U.S. economy has long exhibited the so-called "K-shaped" divergence: the wealthy spend strongly, propping up shining consumption figures, while the actual experience of ordinary citizens is far less optimistic than the statistical data suggests. Therefore, the behavior of top consumers has a disproportionate influence on macroeconomic trends.

The risk uncovered by the Bank of America survey is: If the stock market experiences a substantial pullback, the wealthy groups who currently sustain consumption may compress their spending, putting pressure on U.S. consumption. At that point, listed companies in consumer goods, services, and even autos and other big-ticket sectors will take the brunt of the dual pressure—facing both a shrinking sales end and a reconsideration of their cash flow valuation by the market.

AI Narrative Dominates, Market Resilience in Question

In this fragile market structure, NVIDIA’s upcoming earnings report is the most significant catalyst to watch in the near term. With a market cap of about $5.4 trillion, NVIDIA is currently the world’s most valuable publicly traded company, and the outlook of many tech giants is closely tied to its performance, making the financial report’s market impact far greater than that of a single company.

The "Tech Magnificent Seven" led by NVIDIA currently account for about one-third of S&P 500’s total market value. This highly concentrated structure means that index movements depend largely on the performance of a handful of companies, leaving the market with a limited breadth to withstand risk.

If wealthy consumers tighten their spending due to a falling stock market, the most directly affected will be those companies whose valuations are supported by real cash flow—consumer goods, retail, and service companies. By contrast, technology companies with AI as their core narrative derive their value more from expectations of long-term growth, with near-term cash flow not serving as the main anchor for valuation.

This structural bias will deepen the S&P 500’s reliance on the AI narrative, making this rally even more fragile. Investors may already be weary of warnings that “the party is ending,” but their continued rush into the stock market itself signals that nearly all those with real money have already placed their bets—this, in fact, is the most warning-worthy signal.

Risk Warning and DisclaimerThe market carries risks; investments require caution. This article does not constitute personal investment advice, nor does it take into account any user's specific investment objectives, financial situation, or needs. Users should consider whether any opinions, views, or conclusions presented herein fit their specific circumstances. Investing accordingly is at your own risk. ```