Bank of America's Bull & Bear Indicator Hits 9.6 on July 24, Highest Since 2021, Signals Overheated Stock Market

BAC1.23%
CME0.40%
Bank of America's Bull & Bear Indicator rose to 9.6 on July 24, hitting its highest level since 2021 and triggering a 'sell' signal for the 17th time since 2002, according to strategist Michael Hartnett and the bank's team. The indicator, which uses contrarian logic to measure investor sentiment, signals overbought conditions when market optimism peaks. Historically, the 17 previous signals preceded average global stock market declines of 2% to 3% within three months, with maximum drawdowns ranging from 15% to 20%. The bank also noted that interest rate risks loom over markets, with the CME FedWatch tool showing a 91% probability of at least one Federal Reserve rate hike before 2027. Additionally, global investors' cash holdings have fallen to a historic low of 3.6%, while growing concerns about AI stock bubbles persist amid continued inflows into risk assets.
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