Bank of America: Market Sentiment Index Hits Most Extreme Bullish Level Since 2021, Risk Exposure Should Be Dialed Down Appropriately

BlockBeats News, August 7th, a strategist at Bank of America said that investor sentiment had reached an extreme level of optimism, signaling that it is now time to start reducing exposure to risk assets.

Michael Hartnett's team wrote in a report that the bank's Bull & Bear Indicator rose from 9.4 to 9.7, hitting the highest level since 2021. They noted that the widening breadth of the stock market rally, substantial inflows into high-yield bond funds, and tightening credit spreads were behind the investors' upbeat sentiment. The team favored defensive assets, believing that such assets would help portfolios withstand potential adverse impacts from the economy, monetary policy, and the field of artificial intelligence.

Hartnett stated, "We remain in a summer 'retreat/rotation' phase rather than a 're-engage' phase." He advised investors to reduce their exposure to risk assets or shift towards some defensive, duration, and dollar assets.