What nine different indicators say about market exuberance, according to Goldman Sachs

By Jules Rimmer

Investors, nervous about how far the market has run, may be reassured by Goldman Sachs's analysis

After nine consecutive weekly gains, the S&P broke its winning streak with investors concerned about "too far, too fast".

Despite the S&P 500 enjoying one of its sharpest rallies on record since the end of March, not all the telltale signs of irrational exuberance are visible at present, Goldman Sachs argues.

The firm's U.S. equity strategist, Ben Snider, evaluated nine different metrics across four separate categories and found that while they generally register above historical averages, they are still some distance below previous periods of "speculative mania" in 2000 and 2001.

Potential indicators of exuberance relative to history

Anxiety about "unsustainable investor euphoria" isn't fully justified by the data points at this stage.

The S&P 500 SPX slumped 2.6% on Friday, its worst day since October.

Snider's assessment, published in a weekly note to investors at the close of trading on Friday, is that bull markets, like the one experienced in recent months, typically come to a shuddering halt owing to a combination of "disappointing growth, elevated equity issuance and tightening Fed policy." These conditions don't really exist at this juncture, the report argues, "but each appears closer than it did just a few months ago."

The broad categories measured by Snider and five fellow analysts were share prices, trading activity, investor sentiment and corporate sentiment. Looking at those peaks over the last three decades, the years of 2000 and 2021, the average percentile score of those nine different indicators was 99% and 92% respectively. Right now, the reading is 66%.

Goldman's research momentum and market breadth signals do show signs of extreme elevation in the 98th and 94th percentile respectively. Snider and team point out, though, that recent strength has been driven principally by a 16% surge in earnings-per-share growth estimates. This has actually outstripped the 8% gain chalked up by the index.

Goldman's proprietary speculative trading indicator has risen of late but it's still well below prior peaks while the put-call ratio, a widely-used guide to measure the number of bearish bets made compared to bullish bets, is only in the 88th percentile.

Most reassuringly, the last trading activity signal, short interest for S&P stocks is very high at 3.2% of the index capitalization. This is the highest witnessed since the global financial crisis of 2008.

Short interest for the median S&P 500 stock is very elevated vs. history

Survey-based measures of the investor mindset are also useful, but while the Yale U.S. stock market confidence indices currently suggest extreme bullishness in the 97th percentile, the American Association of Individual Investors poll reflects a different mentality altogether. The most recent weekly reading found that more respondents were bearish (37%) than those who were bullish (36%).

Corporate sentiment readings are also more comforting for investors. The number of IPOs in 2026 is on track to match long-term averages while net issuance of equity, the difference between corporate buybacks and share sales, is expected to match the average volume from 2015 to 2019.

-Jules Rimmer

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06-08-26 0516ET