US stocks flash strongest buy signal in nearly a year as optimism grows
US Stock Markets Flash Strong Buy Signal, Sparking Investor Interest
After a period of heightened uncertainty, US equity markets are now sending their strongest buy signal in nearly a year, prompting investors to question whether the recent pullback has already run its course. Analysts at major Wall Street banks—including Barclays, Goldman Sachs, and Morgan Stanley—are offering clear assessments, with a potential trend reversal in the S&P 500 opening new opportunities for market participants.
According to a Bloomberg report, Barclays has turned optimistic on US stocks, joining a growing chorus of strategists who believe the latest market weakness may be nearing its end. Alex Altmann, Barclays' Global Head of Equities Tactical Strategies, notes that equities are currently flashing their strongest buy signal since early last year.
The bank's Equity Timing Indicator (BETI) recently dropped to -8.3, its lowest level since the market turbulence surrounding Donald Trump's tariff policies in April 2023. Historically, this range has marked particularly attractive entry points for stock investments.
The BETI synthesizes 19 different factors, including market breadth, positioning, investor sentiment, and macroeconomic data, with the goal of identifying tactical turning points in equities. Readings above 7 typically signal weak future returns, while values below -7 often indicate favorable conditions for price rallies.
The -8 to -7 range is especially significant: Since 2015, the S&P 500 has delivered an average 42-day return of 6.6% in such phases, with a 92% success rate. The median gain stands at 5.1%, based on 38 observed instances.
Meanwhile, markets are already showing signs of stabilization. The S&P 500 rose 0.3% on Tuesday, bringing its weekly gain to 1.3%—its strongest two-day performance since the Iran conflict escalated.
The indicator's recent decline stems partly from deteriorating short-term momentum in the S&P 500. While the pullback from this year's highs appears modest at first glance, it carries more weight when considering the unusually low volatility and narrow trading range of the past six months.
Additional pressures included a sharp repricing of high-yield bond spreads and a collapse in Barclays' Equity Euphoria Indicator, which suggests that previously elevated optimism has rapidly dissipated. Bearish sentiment now dominates the market.
Yet Altmann emphasizes that US equities remain attractive at current levels. The relatively cautious positioning of both systematic and discretionary investors could further amplify any upside moves.
A key risk is the potential for a "sharp beta squeeze", where rising prices trigger rapid position adjustments, accelerating gains. Currently, many Commodity Trading Advisors (CTAs) hold minimal or slightly negative exposures, while hedge funds' net equity allocations sit near historical lows.
This setup increases the likelihood that even modest positive catalysts could spark a stronger rally—even without heavy participation from short-term traders.
Despite lingering uncertainties, particularly geopolitical tensions in the Middle East, US equities are showing growing resilience. The S&P 500 recently rebounded from a critical technical support level—the 200-day moving average—snapping a four-day losing streak.
At the same time, investors are increasingly using dips as buying opportunities ("buy the dip"), even as risks such as the impact of artificial intelligence, rising oil prices amid the Iran conflict, and potential weaknesses in the private credit market remain under scrutiny.
Several major investment banks now share an upbeat outlook. Strategists at Goldman Sachs, Morgan Stanley, and JPMorgan point to robust earnings growth and valuations that, while still elevated, appear less stretched than before. As early as March, Citadel's Scott Rubner abandoned his bearish stance on U.S. stocks, citing supportive factors such as rising retail investor inflows, declining volatility, and seasonal trends.
