Key Takeaways:
Alex Altmann, Barclays global head of equity tactical strategies, turned cautious on US stocks Tuesday, forecasting a 6% to 7% S&P 500 pullback.
"Retail euphoria is as high, and in some cases, even higher than what we saw in 2021," Altmann said on the Barclays Brief podcast, noting that the earlier euphoria occurred during deeply negative real yields versus positive real yields today.
The S&P 500 has already fallen 2.9% from its June 2 record close of 7,606, meaning the correction may be about halfway done. Altmann cited exploding financing costs that have pushed real yields higher, crowded positioning in AI-linked trades, and investors reaching for upside in stock options. He also flagged risks from levered single-stock ETFs, which can amplify moves in both directions through daily rebalancing.
The shift marks a notable reversal for a strategist who urged investors to stay the course during the Iran conflict in March and held firm last September when Wall Street turned bearish. Altmann said he would turn bullish again once lower prices flush out euphoria, big IPOs are absorbed smoothly, and real yields ease.
Altmann pointed to the absence of remaining institutional bearishness as another warning sign. "That's not to say it's wrong, but in our experience, when we get to this level of euphoria, the forward-return profile on the S&P doesn't look that good anymore," he said.
Momentum trading has also become crowded, capturing both retail and institutional investors, he said. Those trades are vulnerable to sharp corrections from even small positioning adjustments or narrative shifts.
The call comes as the market braces for the May consumer price index report at 8:30 a.m. Wednesday. Economists expect headline inflation to top 4 percent for the first time since 2023, a result that could push the 10-year Treasury yield — already at 4.547 percent — higher and further pressure equity multiples.
For investors, the cautious stance from a previously consistent bull signals that near-term risks are building. The next catalyst to watch is the CPI release, which will test whether the selloff deepens or stabilizes as markets reassess the rate path.
This article is for informational purposes only and does not constitute investment advice.
