Institutional Investor Feeling Reaches Bubble Level (Maximum 4 Years and Half)

[Igor Pereira]

Warren Buffett has a famous phrase: "Be afraid when others are greedy". If we take that advice, this is the time to be afraid.

Newly released data from Bank of America Global Fund Manager Survey (FMS) show that the optimism of the world's largest fund managers reached dangerous levels of euphoria in December 2025.

By Igor Pereira

The investor sentiment chart (see attached image) shot to 7.4 in December.

• The Record: This is the highest level of optimism in 4 and a half years (since mid 2021).

• Speed: The index has risen by 5 whole points since the April minimum. This is not organic growth; it is a risky race (FOMO - Fear Of Missing Out Institu­tional).

• What Does It Measure: This indicator combines three factors: cash levels (money stopped), allocation in actions and global growth expectations.

  • == sync, corrected by elderman == The funds are with little box (invested everything) and Overcrowded in shares, blindly betting on continuous growth.

As an analyst, I interpret this graph as a Contrary Indicator.

When the feeling reaches levels of "Euphoria" (above 7.0), it means that almost everyone who wanted to buy has already bought. There's no more side money to push the market up. The market is saturated ("Overbought").

Historically, peaks of feeling like this (see 2021 on the chart) mark the top of the market before a painful reversal. With optimism pricing a perfect scenario ("Trump 2.0", tax cuts, etc.), any negative news — whether it's inflation coming back or geopolitical tension — can cause a cascade liquidation, as all will run to the exit door at the same time.

Impact on the Financial Market (What to Expect)

1. S&P 500 and Nasdaq (Actions):

   • Risk: Most High of Correction (Pullback). The market is priced for perfection. Traders must tighten the Stop Loss and avoid aggressive purchases at the current top. Risk asymmetry is now unfavorable for purchased (Bulls).

2. Gold (XAU/USD):

   • Opportunity: Gold shines when the bubble of trust bursts. If the stock market corrects due to excessive euphoria, institutional capital will seek protection (Safe Haven). Keep the buy bias on Gold as hedge (protection) against the approaching volatility.

3. Dollar (USD):

   • There may be volatility. If there is a risk aversion shock (Risk Off), the Dollar may temporarily strengthen itself as a refuge, but the long-term trend (undollarization) remains.

ExpertFX Traders Conclusion: Don't get carried away by the herd. When Wall Street managers are All-In (completely invested) and euphoric, the top is near. This is the time to defend capital, not aggressively leverage indices.