Analysis
Bank of America's Bull & Bear Indicator, the firm's contrarian gauge of investor positioning, rose to 9.7 this week from 9.4, its highest reading since 2021 and above the 8.0 level BofA defines as a sell signal, according to CNBC and Bloomberg. The gauge is built from equity fund flows, credit spreads and global stock-market breadth; strong high-yield bond inflows and tighter spreads on global high-yield and Tier 1 bonds drove this week's jump.
Weekly flows into equities totaled $32.9 billion, split between $40.1 billion into ETFs and $7.2 billion of outflows from mutual funds -- a rotation pattern BofA reads as retail and systematic money piling in while some active managers trim. BofA's own recommendation in response is to reduce exposure to risk assets and rotate into defensives: consumer staples, REITs, small caps, biotech and the US dollar.
“BofA's own recommendation in response is to reduce exposure to risk assets and rotate into defensives: consumer staples, REITs, small caps, biotech and the US dollar.”
The reading landed the same day the S&P 500 and Nasdaq both rallied on a weaker-than-expected July jobs report, and the same week Atlassian and Twilio both posted double-digit earnings-driven stock jumps -- meaning the market's most extreme bullish sentiment reading in five years arrived precisely when there was the most genuinely good news to justify it, not despite an absence of it.