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Record Wall Street Euphoria Is About To Trigger First BofA “Sell Signal” Since 2008

First it was Citi, then Goldman. Now, it’s Bank of America’s turn to warn that the market’s excess euphoria is about to cause some pain.

In a note from BofA’s Savita Subramanian, the equity strategist echoed the warning from Citi and Goldman, and said that “sentiment and valuations are becoming euphoric. Our sentiment indicator is now closest to the “Sell” signal since the GFC.” And yet, despite the bank’s “more cautious view”, BofA refuses to tell its clients to sell – after all this market refuses to ever go down – and says that “we are bullish on certain areas of the market: cyclicals/Value and small caps.”

Some more details: according to Subramanian, after the 16% gain in 2020, a year that sent tens of millions to the unemployed rolls, stocks now trade at 22.5x earnings, largely in line with the August peak level (22.7x), which is despite a ~40bps jump in the 10-year yield.

So big the overvaluation that according to BofA’s 20 valuation metrics, the market is now overvalued according to 18 out of 20 (and very overvalued according to 15 of 20).

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