The S&P 500 (SPX) bottomed on April 8 as fear over President Trump’s tariffs reached a peak. Since then, the benchmark index has climbed higher by an incredible 24% in just 3 months.
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That’s resulted in a significant uptick in Barclays’ (BCS) Equity Euphoria Indicator, which measures market sentiment and volatility. The one-month average on the indicator has now returned to double-digit territory at 10.7%. The indicator’s historical average sits at around 7% but increases to 10% during times of euphoria, such as during the Dotcom bubble and the meme stock rally of 2021.
Equity Euphoria Indicator Issues Warning Signal
“Elevated readings of the indicator suggest that investors may be overly exuberant, which could lead to increased market volatility,” said Barclays head of U.S. equity derivatives strategy Stefano Pascale.
The investment bank also pointed to other signs of an exuberant market, such as increased SPAC listings and technology companies with no profit rising higher as measured by Cathie Wood’s ARK Innovation ETF (ARKK). On top of that, meme stocks have rallied while Bitcoin (BTC) has posted sky-high gains. The original cryptocurrency has increased by about 31% during the past three months and is sitting comfortably above $100,000.
