Sentiment in the red-hot stock market is nearing euphoric levels – A top equity strategist shares 5 ways investors can prepare their portfolios for downside risk through year’s end

• Stocks have been on fire since mid-October, but Bank of America says investors should take caution.
• BofA’s Jill Carey Hall told Insider in an interview about the biggest risks facing stocks today.
• Here are five ways investors can prepare for what could be a rocky end to 2021.

What can be harder for investors to stomach than suffering huge losses on their investments? Selling the top stocks in their portfolio, only to see them continue to charge higher day after day.

Though the S&P 500 has risen in 14 of 16 days since October 12, gaining 7% in that span, now is not the time to get complacent. That’s the view of Bank of America’s Jill Carey Hall, a US equity strategist who heads up the firm’s small- and mid-cap investing strategy.

Historically high stock valuations, ebullient market sentiment, and fading corporate optimism are all reasons why Bank of America’s five-factor model recommends that investors practice sound risk management, even as opportunities remain in pockets of the market.