Bank of America’s bull/bear indicator rose from 7.9 to 8.5 over the past few days, triggering a reverse “sell” signal for risk assets, according to a note from analyst Michael Hartnett and colleagues. wealth this morning. The metric is derived from Bank of America’s regular Fund Manager Survey, which asks more than 200 investment managers about their risk appetite. The logic of the Bull and Bear indicator is that when everyone in the market is bullish, it is time to get out.
S&P 500 futures are up 0.25% this morning. It closed up 0.79% on the previous trading day. The index remains less than 2% below its all-time high. Asian markets basically closed this morning. Europe and the UK were unchanged in early trade. Whether stocks, especially technology stocks, are overvalued has been an ongoing theme in the stock market throughout the year.
Hartnett said Bank of America’s sell signal has been activated 16 times since 2002. On average, the MSCI World Index, an index representing global stocks, has since fallen 2.4%, with the maximum average decline three months later being 8.5%, the bank said.
The metric is correct 63% of the time, so it’s not perfect. But Bank of America also noted that investors currently have an unusually “risk-on” sentiment on stocks: Stock exchange-traded fund inflows hit a record $145 billion last week, Hartnett wrote, with U.S. stocks recording the second-highest weekly inflow on record ($77.9 billion). Therefore, this indicator means that smart investors may want to become fearful given that others are too greedy.
Investor sentiment roughly correlates with sentiment on the Purchasing Managers Index, a survey of supply chain managers responsible for corporate purchasing. For now, investors have parted ways with PMI, with the former taking a more optimistic view of the future than the latter. Harnett said they seemed to expect PMI to follow their lead.
“investor [appear to be] Bulls positioned for ‘hot’ PMI and [earnings per share] Accelerate interest rate cuts, tariff cuts, tax cuts,” he told clients.
Instead, assuming no market correction — or that the reversal is just temporary — he expects stock earnings per share to rise 9% in 2026, even as U.S. unemployment rises and the threat of “bond vigilantes” slows [the] AI capex is booming. “
Here’s a snapshot of the market ahead of the opening bell in New York this morning:
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S&P 500 Index Futures It was up 0.33% this morning. It closed up 0.79% on the previous trading day.
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this Stoxx Europe 600 Index Prices were unchanged in early trade. British FTSE 100 Prices were unchanged in early trade.
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Japanese Nikkei 225 Index up 1.03%.
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Chinese CSI 300 up 0.34%.
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South Korea Korea Composite Index up 0.65%.
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Indian nifty 50 up 0.59%.
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Bitcoin Price is $88,000.
This story originally appeared on Fortune.com