Investors should be aware of the 'buffalo' market, according to Bank of America.

• According to Bank of America, today's market is behaving like a buffalo rather than a bull, indicating that it is likely to wander.
• Investors can expect more market volatility in the runup to November's election.
• What investors can anticipate in the remainder of 2024 and the danger they should monitor presently.

On Wednesday, the S&P 500 index experienced its worst trading session since 2022, despite previously reaching new highs after several weeks.

The market started to recover on Thursday, despite a selloff in technology stocks. Experts believe that such stock fluctuations and sector shifts are typical during a bull market.

Today, Bank of America is referring to the current market conditions as a "buffalo market," which is a type of bull market. However, unlike a typical bull market, this market may experience a decline after a period of strong growth.

"Ultimately, the buffalo will return to being a bull due to fundamentals, even if it roams or wanders during the summer months, as stated by Marci McGregor, head of portfolio strategy at Merrill and Bank of America Private Bank."

The firm predicts that markets will end the year higher, considering factors such as earnings, investment cycle, financial conditions, interest rates, and generative artificial intelligence.

"McGregor stated that the necessary foundations are present for the uptrend to persist, but there may be some fluctuations."

Expect a pickup in volatility around the election

Election years also tend to come with distinct market patterns.

McGregor predicted that markets would have a choppy feeling from July to November.

After the election, there may be a clearer direction in November and December.

She stated that Bank of America anticipates U.S. equities to finish the year with a higher value than their current state.

According to McGregor, those patterns tend to hold true regardless of the election outcome.

It's more beneficial to focus on policies rather than politics when predicting how investments will perform under the next presidential administration, according to McGregor. The policies that are implemented will have a greater influence on industries, sectors, and companies than which party is elected to power.

The current earnings recovery is a more significant factor to monitor now, according to McGregor.

"In my opinion, earnings are the key factor that will drive the next market rotation, rather than the election, according to McGregor."

Resist the temptation to hold too much cash

The Federal Reserve's implementation of higher interest rates has resulted in the highest returns on cash in recent years.

Some investors may be making the mistake of holding too much cash, according to experts.

Ritholtz Wealth Management's chief market strategist, Callie Cox, stated on bizfocushub.com that under-investing poses a risk.

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McGregor advised clients that the current high returns on cash may not always be sustainable, and that sitting out market gains carries risks. Bank of America predicts that the Fed will begin cutting rates this year, with the first cut occurring in September and another in December.

Investors who avoid the markets may face long-term consequences, especially since the markets have increased by over 60% since October 2022, as per McGregor.

If the market experiences a pullback and pause, we will consider it a buying opportunity if clients are not at their target allocation, according to McGregor.