Investing.com – Bank of America’s Global Risk-Love indicator has reached the 93rd percentile of its historical range since 1987, signaling early signs of market euphoria, according to a recent report from the financial institution.
The elevated sentiment reading is primarily driven by low cash levels, reduced volatility measures, tightened credit spreads, and a decreased put-call ratio, suggesting investors may be taking on more risk than usual in current market conditions.
BofA notes that this apparent euphoria is not yet confirmed by other sentiment measures, including the bank’s B & B Indicator and Sell-Side Indicator, while technical factors and positioning components of the Risk-Love metric also haven’t reached similar extreme levels.
The bank advises investors to “stay vigilant” in response to these elevated sentiment readings, which typically serve as a contrarian warning sign in market analysis.
Despite the cautionary tone regarding sentiment, Bank of America maintains its “constructive stance” on markets, citing supportive factors including earnings trends, policy environment, and healthy market breadth that “remain squarely in favor” of continued market performance.
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