"Bulls on Wall Street are Concerned: Market Volatility is Increasing"

The Current Bull Market and Investor Sentiment

The bull market in the U.S. stock market has completed its third year; however, investors still maintain a cautious approach towards the current price increases. These concerns may lead to a classic 'wall of worry' in the stock market and an increase in volatility in the indices.

Investor Concerns

According to analyses measuring investor sentiment, the equity strategy team at Citigroup, led by Scott Chronert, has highlighted investors' concerns regarding macroeconomic factors. Soaring stock valuations, potential artificial intelligence bubbles, tight credit conditions, and a weak labor market are factors that lead to continuous worries among investors. Nevertheless, investors continue to allocate a high proportion of their portfolios to large-cap U.S. stocks.

Levkovich Index and High Return Expectations

Citigroup's Levkovich Index indicates that investors are positioning themselves with high return expectations; the index is at historically high levels, excluding periods of the tech bubble and post-pandemic recovery. Chronert stated that this enthusiasm does not close the gap of mistrust towards the current bull market. The S&P 500 Index achieved its 35th record close of 2025 on Monday. However, no upward trend is observed in the weekly surveys conducted by the American Association of Individual Investors.

Market Expectations and Volatility Risks

Bank strategists predict that the combination of enthusiasm in positions and the reluctance of bulls may lead to a rise in the stock markets, overcoming the wall of worry in the face of positive news. However, negative economic data could create rapid selling pressure. Chronert noted that investors currently show no tendency to allocate "significant amounts" of cash to the market.

Rise of Volatility and Cboe VIX

Known as Wall Street's 'fear gauge,' the Cboe Volatility Index (VIX) is fluctuating around the 16 level, having reached its lowest level since October 2. Citigroup announced that the year-end target for the S&P 500 was set at 6,600 points, but it exceeded this by reaching 6,855 points as of Monday. Citigroup's projected 21.4 times profit multiple for 2026 is considered to be an important indicator for investors.

Trends Among Foreign Investors

Foreign investors also show a strong dependence on U.S. markets. The MSCI All Country World Index indicates that the share of the U.S. stands at around 63%, demonstrating that U.S. stocks continue to remain the most significant asset class from the perspective of global investors. Investors continue to carefully monitor the price fluctuations arising from profit growth.