Overbuying alarm sounded: Bank of America warns that global stock markets have reached the threshold of selling signal.

A Bank of America strategist pointed out that global stock markets are flashing an overbought warning signal, as their moving average levels have reached the threshold that historically indicates a sell signal for risk assets. Led by Michael Hartnett, the strategist team wrote in a report that as of the week ending January 28th, around 89% of the MSCI stock index trading prices were above their 50-day and 200-day moving averages. This data has surpassed the 88% threshold that the bank considers a sell signal. The Bank of America strategist stated that this excessive market position coincided with investors pulling out $15.4 billion from stock funds during the week, highlighting that market caution is rising as the market continues to reach new highs. The MSCI World Index hit an all-time high on January 27th and is poised to achieve its strongest monthly performance since September of last year. Hartnett pointed out that the Bank of America Bull & Bear indicator still shows that investor sentiment is at an "extreme" bullish state, as the strong performance of global stock indices and the steady performance of credit markets have so far offset the outflow of funds from the stock market. Meanwhile, there has been a positive flow of funds into U.S. stock funds, with $9.2 billion flowing into them during the week. The Bank of America team cited EPFR Global data indicating that European funds experienced their first outflow of funds in seven weeks, amounting to $400 million. Hartnett stated that his most favored trades for 2026 are long positions in bonds, international stocks, and gold. His preference for international stocks since the end of 2024 has proven to be forward-thinking, as during this period U.S. stocks have relatively underperformed.