The Bank of America Bull & Bear Index has risen from 9.4 to 9.7, its highest level since 2021, clearly entering the "Sell" zone according to its contrarian rules. The rise is not driven by single-factor stock sentiment, but by a simultaneous strengthening of equity flows, fund manager positions, credit market technicals, and bond flows. Equity flows are at the 97th percentile historically, and FMS positions are at the 99th percentile.
However, Hartnett did not simply conclude that a "bubble is about to burst." Instead, he believes that the currency intervention of the past week further demonstrates that US policymakers will try to prevent a sudden tightening of financial conditions and avoid deleveraging from turning into a systemic shock.
The report even summarizes this mechanism as: intervening in exchange rates and liquidity during minor crises, and, if necessary, using more extreme tools, potentially evolving into "yield curve control" style policy support.
The real risk, therefore, is not "excessively high sentiment" itself, but whether policy can continue to suppress financial conditions. Bank of America believes that only a combination of "rising yields, a weaker dollar, and weakening bank stocks" could signal a genuine loosening of the bull market structure.
