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Euphoria: In five months, investors have been flocking to stocks for more than twelve years

“It’s really expensive, it’s so pleasant,” says Cyrus’s Tomash Weiler at the market, saying the incentives are unprecedented. According to Trinity Bank chief economist Lukáš Kovanda, the stock price is also high.

European stocks have reached new highs in recent days. Global exchanges are also close to the record. Investors believe in the continued support of the markets by central banks and are pouring more and more money into the exchanges.

According to a survey by Bank of America and EPFR Global, $ 576 billion has flowed into equity funds over the past five months. That’s more than in the past twelve years, when investors invested $ 452 billion in equity funds.

If this pace continues, Bank of America estimates that an astronomical sum of more than $ 1.6 trillion will flow into these funds this year. In the past 20 years, there was a record influx in 2017, when $ 295 billion poured into equity funds.

The tremendous optimism of players in the stock market can also be seen in other indicators. The US Citigroup Investment Mood Index shows that investors are in euphoria for most of the year.

“It is strange that we are seeing very high sentiment indicators at a time when the economy is still recovering,” George Matteo, chief investment officer at Key Private Bank, told Bloomberg. According to him, the support from central banks and governments will continue for some time, but then it will disappear at some point.

Analysts are already warning that due to over-optimism and bullish equity valuations, there could be a downturn. “This creates a historic 100% probability that the markets will decline from current levels within the next twelve months,” said Tobias Levkovic, chief equity analyst at Citigroup.

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Other experts hold a similar opinion, citing the low value of the so-called VIX fear index. Its value reached its lowest level since mid-February 2020, just before the stock market crash due to the pandemic.

“This does not mean that there will be no price fluctuations in the markets in the coming weeks,” notes Jan Pavlik, chief broker at J&T Bank. Similarly, Covanda describes it: “The markets were the quietest before the storm.”