A prominent asset manager has issued a stark warning that global equity markets face a potential 10% correction, citing extreme levels of investor optimism captured in the latest Bank of America sentiment survey.
The strategist argues that when market participants become this uniformly bullish, the setup for a significant sell-off is often in place, as there is little remaining buying power to sustain further gains.
The monthly survey from Bank of America, a key barometer of institutional sentiment, has registered readings that historically precede periods of heightened volatility and downward price action.
The bank’s research team has long used this data to identify contrarian signals, noting that peak optimism often coincides with market tops.
This latest reading suggests that the current rally may be running on fumes, with risk appetite stretched to unsustainable levels.
This cautionary note comes as traders navigate a complex macroeconomic backdrop.