Bank of America’s Bull & Bear Indicator rose from 7.9 to 8.5 in the past few days, triggering its contrarian “sell” signal for risk assets, according to a note from analyst Michael Hartnett and his colleagues seen by Fortune this morning. The indicator is derived from BofA’s regular fund manager survey, which asks 200-plus investment managers about their appetite for risk. The logic of the Bull & Bear Indicator is that when everyone in the market is bullish, it’s time to leave.
S&P 500 futures were up 0.25% this morning. The last session closed up 0.79%. The index remains a little less than 2% beneath its all-time high. Markets in Asia largely closed up this morning. Europe and the U.K. were flat in early trading. Whether stocks are overvalued—especially tech stocks—has been a running theme in the equity markets all year long.
BofA’s sell signal has been activated 16 times since 2002, Hartnett says. On average, the MSCI All-Country World Index (an index that represents stocks globally) declined by 2.4% afterward, the bank says, with a maximum average drawdown of 8.5% by three months later.
