BofA Issues Overbought Warning for Global Stock Markets

Important Overbought Warning from BofA

The Bank of America (BofA), a financial institution based in the United States, has announced that overbought signals in stock markets around the world are becoming increasingly pronounced. Expert strategists indicate that critical levels, which are seen as a general sell signal for risky assets based on historical data, are being approached.

Sales Threshold Exceeded in Technical Indicators

Analysts at BofA, led by Michael Hartnett, reported that in the week ending January 28, 89% of MSCI stock indices were trading above both the 50-day and 200-day moving averages. This rate exceeded the 88% sell signal threshold closely monitored by BofA, creating a noteworthy situation.

Regional Fund Flows and Divergence

When examining global fund flows, a significant weekly inflow of $9.2 billion was observed into U.S. equity funds, while European equity funds experienced a net outflow of $400 million after seven consecutive weeks of inflows. This situation indicates that investors are focusing on different directions in global markets and that regional divergences are occurring.

Increasing Caution in Emerging Markets

On the other hand, excessive positioning coincided with a total withdrawal of $15.4 billion from equity funds by investors during the same period. This data reveals that despite the markets showing an upward trend, investors are adopting a cautious stance. Notably, during a period when the MSCI World Index reached its historical peak on January 27, marking the strongest monthly performance since September, this situation is significant.

Investor Optimism Remains at High Levels

BofA's bull-bear indicator shows that investor optimism remains at "over" levels, reflecting the widespread increase observed in global stock indices and the solid appearance in credit markets. This situation indicates that the sentiment of optimism continues even during times of increased uncertainty in the markets.