Investor enthusiasm for stocks is reaching a fever pitch, according to a reliable contrarian indicator that is signaling a tough time ahead for the market. An indicator commonly referred to as the Citigroup Panic/Euphoria Model, now officially called the Levkovich Index, is registering a near-record high level, meaning that confidence is sky-high. Specifically, the index most recently posted a 0.79 reading, which is almost double the “euphoria” level of 0.41. The gauge is based on short interest, margin debt, sentiment surveys and several other yardsticks used to gauge what investors are thinking and doing. Time has shown that the measure is a good counter signal for where the market is heading. “Historically, a reading below panic supports a better than 95% likelihood that stock prices will be higher one year later, while euphoria levels generate a better than 80% probability of stock prices being lower one year later,” Citi says in its standard disclaimer for the index. Little wonder that investors are brimming with confidence. Despite a somewhat skittish run during the government shutdown and the days since the impasse was settled, the S & P 500 has soared 14% in 2025. Sentiment also is running strong for the year ahead , with Wall Street strategists already preparing bullish forecasts. Mike Wilson at Morgan Stanley, for instance, is pegging the large-cap index at 7,800 for the end of 2026, a gaudy 16% jump from the current level. .SPX YTD line S & P 500 this year To be sure, not everyone is on board. The American Association of Individual Investors survey is actually showing bears holding about an 18 percentage point advantage over bulls. Also, Bank of America’s Bull & Bear Indicator is in neutral territory even though the bank recently reported that inflows to equities this year is on pace for their second-biggest year ever — behind the peak set just last year.
With markets at new highs, investor sentiment is in ‘euphoria’ territory
