Quant Model Shows Rally in Stocks Is Approaching ‘Manic’ Level

An historic surge in US stocks has pushed equities to fresh highs, yet signs of overheating sentiment suggest that the rally may be entering a slower phase.

The rebound from the March lows, fueled in part by hopes of easing tensions between the US and Iran and a surge in corporate earnings, has lifted investor sentiment toward what a quantitative model from Bloomberg Intelligence strategists suggests is “manic” territory. The model tracks six components, and three of them have driven it toward that level: high-yield corporate bond spreads, low volatility, and pairwise correlations.