Goldman Sachs' Risk Appetite Indicator reached its highest level since 2021. The indicator hit the 99th percentile of all observations since 1991.
This reading suggests narrowing upside potential and an increasing probability of a market correction. Extreme risk appetite, elevated valuations, and crowded bullish positioning create a precarious market environment.
Historical data from similar periods show positive but below-average forward equity returns. Goldman Sachs recommends a neutral tactical position on equities for a three-month horizon. The firm maintains a modest overweight stance for a 12-month period.