By one measure, stock-market euphoria just hit a 6-year high

04.07.2017 / 09:33

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If bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria, as famed investor John Templeton once said, then recent research from Bank of America Merrill Lynch offers cause for concern.

Optimism reached its highest level on Wall Street since 2011 in June, according to strategists at BofA Merrill Lynch, including equity and quantitative strategists Savita Subramanian and Dan Suzuki. The bank’s so-called sell-side indicator, which BAML says has been a reliable contrarian indicator, hit 56.4, rising 2.4 percentage points, and perhaps signaling that the bull market in U.S. stocks that is in its ninth year may be on its last legs.

“The recent inflection from skepticism to optimism could be the first step toward the market euphoria that we typically see at the end of bull markets and that has been glaringly absent so far in the cycle.”

Of course, the firm isn’t the only research shop advising investors to brace for an unraveling in the unrelenting upward trend in equities.

So far, weakness in technology stocks has weighed on the tech-laden Nasdaq Composite Index and the broad-market S&P 500 index, where tech stocks hold the largest market-capitalization weighting at 22%. The tech sector has been among the biggest factors helping to drive benchmarks to new heights, until recently sputtering.

Source: Bloomberg

Junior Trader Stefan Panteleev

Varchev Traders

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By one measure, stock-market euphoria just hit a 6-year high

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