Signs of investor euphoria are being flashed by U.S. stocks even as crypto markets remain subdued, and a spillover correction is being risked.
Signs of euphoria are being flashed by U.S. stocks, which is contrasting with a muted crypto market as clues on what’s next are looked for by traders.
A gauge of investor sentiment is provided by the Bank of America’s Global Equity Risk-Love indicator. It is suggested by the indicator that investor positioning, volatility, and technicals in the stock market are becoming dangerously bullish.
On Monday, a tweet was written by The Kobeissi Letter, in which it was noted that ‘BofA’s Global Equity Risk-Love indicator jumped to 1.4, its highest in 13 months.’ This metric has been surged from panic levels to euphoria in just 4 months, and since 1987, sentiment has only been higher 7% of the time.
US Stock Market and Crypto Experience Rapid Growth Since April on Dovish Data
Since April, rapid growth has been experienced by both the U.S. stock market and crypto, which has been buoyed by dovish economic data and ETF flows.
Over the last seven days, two of crypto’s largest coins by market capitalization have remained flat. A negative 0.4% return for Ethereum was clocked in, while less than a percent for Bitcoin was, according to CoinGecko data.
If investor sentiment is tipped into excess, a risk-off turn could spark a pullback in equities. This would likely have a spill into digital assets and Bitcoin’s recent slide deepened.
The question is whether that point has truly been reached by the optimism.
It was acknowledged by the bank in its August report that the recent surge in the S&P 500 index and meme stocks “has been enough to have some eyebrows raised.”
Still, it was clarified that despite this ‘disconnect between investor enthusiasm and fundamentals, it is not a risk that is overly concerned about for now.’
A cautious stance is being taken by individual investors, according to a recent sentiment survey from the American Association of Individual Investors.
It was shown by the survey that only 15.5% of respondents remained bullish. This indicates that ‘euphoria’ is missing among retail and short-term traders.
A similar outlook is also shown by Crypto’s Fear and Greed Index, with “fear” being the dominant narrative.
The crypto market outlook remains skewed in favor of bears in the short term due to September’s seasonality, which has had an average return of 3.34% yielded over the past 12 years, as was previously reported .
The September 5 jobs data release may have investors positioned ahead of the September 17 rate cut decision, but for now, a defensive stance is being taken by traders.
