Investor enthusiasm for stocks is at an all-time high, according to a reliable contrarian indicator, suggesting difficult times ahead for the market. The index commonly referred to as the Citigroup Panic/Euphoria Model (now officially called the Levkovich Index) is at near-record highs, meaning confidence is very high. Specifically, the index’s most recent reading was 0.79, which is almost double the “well-being” level of 0.41. This indicator is based on short-term interest rates, margin debt, sentiment research, and several other criteria used to assess what investors are thinking and doing. Over time, it has become clear that this measure is a good reverse signal for the direction of the market. “Historically, numbers below Panic confirm that there is a greater than 95% chance that stock prices will rise one year from now, while euphoria levels confirm that there is a greater than 80% chance that stock prices will fall one year from now,” Citi said in the index’s standard disclaimer. No wonder investors are brimming with confidence. The S&P 500 rose 14% in 2025, despite some volatility during the government shutdown and in the days since the impasse ended. Sentiment is also strong heading into next year, with Wall Street strategists already preparing bullish forecasts. For example, Morgan Stanley’s Mike Wilson has pegged the large-cap index at 7,800 by the end of 2026, a hefty 16% increase from current levels. This Year’s .SPX YTD Line S&P 500 Admittedly, that doesn’t apply to everyone. Research from the American Association of Individual Investors shows that bears actually hold an approximately 18 percentage point advantage over bulls. And Bank of America’s Bull and Bear Indicator is in neutral territory, despite recently reporting that this year’s inflows into stocks are at the second-highest pace on record and below the peak recorded last year.
