(Bloomberg) -- If the summer slowdown and glasses of rose are making you optimistic, you're not alone. And for the stock market, that's terrifying.
With the S&P 500 Index sitting within 2 percent of a record following a volatile week, bullishness on U.S. stocks reached its highest level in six years, according to Bank of America Merrill Lynch's Sell Side Consensus Indicator.
The problem is the bank uses the measure as a contrarian indicator. So its analysts are now concerned that this could be the “euphoria moment” they were anticipating in their year-ahead outlook in December that forecast the possible end of the eight-year bull market.
“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,” Bank of America analysts led by Savita Subramanian, head of U.S. equity and quantitative strategy, wrote in a client note Monday.
At these levels, the indicator is pointing toward a 12-month return of 12 percent, the team wrote, adding that historically this level has also led to positive returns over that time frame in 93 percent of all instances.
“In June, the Sell Side Indicator, our measure of Wall Street's bullishness on stocks, rose by 2.4 percentage points to 56.4, its highest level since 2011,” the analysts wrote.
To contact the reporter on this story: Julie Verhage in New York at jverhage2@bloomberg.net.
To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Eric J. Weiner, Andrew Dunn
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