MW Why exploding retail euphoria and leveraged ETFs have scared one stock-market bull into turning cautious

By Barbara Kollmeyer

Barclays strategist says the S&P 500 is halfway through a correction

One stock-market bull is getting cautious.

Stocks are setting up for another rough day, led by tech, as a crucial consumer price inflation report looms. An upside inflation surprise could work against the already stressed tech trade if it drives up expectations for Fed rate hikes.

Alarm bells are starting to ring on Wall Street, and our call of the day from Barclays' global head of equity tactical strategies, Alex Altmann, says he's pressing pause on U.S. stocks because of a worrying technical setup.

The strategist is not usually a nervous nellie. He stuck to his guns last September when Wall Street was going the other way and urged investors to stay the course in March as the Iran conflict broke out. Following that advice would have required nerves of steel as the market initially pulled back during the war, but then paid off as stocks surged to record highs into June.

Altmann is now urging a shift to a short-term tactically cautious view on U.S. stocks, he told a Barclays Brief podcast on Tuesday. He explained that the cost of financing has "exploded higher," driving up real yields - returns earned after adjusting for inflation - and weighing on stock-market multiples.

He's also worried about over-exuberance on Main Street and Wall Street. "We can see that retail euphoria is as high, and in some cases, even higher than what we saw in 2021, bearing in mind we were in deeply negative real yields then versus positive real yields today," he said.

Altmann said there isn't any institutional bearishness remaining, either. "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."

His shift on stocks was triggered two weeks ago, when he and his colleagues started to see accumulating signs of retail euphoria, crowded positioning in AI-linked trades and investors "reaching for the upside" rather than the downside when it came to stock options

He's also worried about how levered exchange-traded funds, particularly for single stocks, could cause problems for markets.

"You get these tail-wagging-the-dog scenarios because in order for these levered ETFs to rebalance each day, they can end up driving a disproportionate amount of stock through the underlying channel, and that can in turn become a self-fulfilling prophecy, pushing stocks that have gone up a lot, up even more and vice versa to the downside," he said.

And that's basically what has been happening over the past few weeks, he said.

Another issue is the renewed interest in momentum trading, when investors chase the stocks that are pushing higher.

"Momentum has become crowded, it's captured the imagination of the retail community and the institutional community, and as a consequence of that, you end up with a very crowded set of trades," he said. Those trades are then vulnerable to short and sharp corrections, even in the case of small positioning adjustments or narrative shifts.

Altmann said he's looking for a total pullback for the S&P 500 SPX of around 6% to 7%, which he sees as possibly halfway done due to recent drops. The index was down 2.9% from its June 2 record close as of Tuesday.

As for what would get the strategist more bullish, he'd like to see lower stock prices to help flush out some of that investor euphoria, and see the market, as well as seeing those big IPOs expected this year, "get digested well in markets." Another thing he'd like to see is real yields ease off.

"If the Fed chair has the ability to try to jawbone those lower and provide some assurances, I do think that would also provide the tailwind as well," he said.

The markets

U.S. stock futures (ES00) (YM00) (NQ00) are down, with tech in the lead, the 10-year Treasury yield BX:TMUBMUSD10Y is rising and gold (GC00) and silver (SI00) are tumbling.

 
Key asset performance                                                Last       5d      1m       YTD     1y 
S&P 500                                                              7386.65    -2.93%  -0.19%   7.91%   22.32% 
Nasdaq Composite                                                     25,678.82  -5.22%  -1.57%   10.48%  30.25% 
10-year Treasury                                                     4.535      3.50    6.60     36.30   10.80 
Gold                                                                 4189.2     -6.13%  -10.81%  -3.30%  24.09% 
Oil                                                                  88.14      -8.38%  -12.73%  53.53%  29.05% 
Data: MarketWatch. Treasury yields change expressed in basis points 

The buzz

Consumer prices for May are due at 8:30 a.m. Economists expect headline inflation will top 4% for the first time since 2023.

Gulf tensions are heating up again after the U.S. struck several targets in Iran following the downing of an Apache helicopter near the Strait of Hormuz.

The Treasury will announce the result of a $39 billion 10-year note auction at 1 p.m.

Super Micro Computer stock $(SMCI)$ is tumbling after the AI server maker announced a $7 billion equity and equity-linked financing package.

Cloud computing group Oracle $(ORCL)$ will report after the close.

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The chart

Equity analysts at Wells Fargo led by Ohsung Kwon shared this chart compiling an NBC poll in March that found a net 20% of voters viewed AI negatively - worse than -18% for ICE and -12% for President Donald Trump. The unpopularity of the product is seen as increasing one risk to the AI trade: more regulation. "Heading into midterms, we expect more noise around AI regulation, especially around power usage and labor displacement. Policy risk could become a more meaningful overhang, if more aggressive policy proposals gain more traction," they said. AI could see a "self-imposed regulation or a slowdown in development" to allow more time to adjust to its implications, though they no evidence of broad labor-market disruption from the technology.

Top tickers

These were the top-searched tickers on MarketWatch as of 6 a.m.:

 
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GME     GameStop 
AAPL    Apple 
PLTR    Palantir 
INTC    Intel 
MRVL    Marvell 

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-Barbara Kollmeyer

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June 10, 2026 06:57 ET (10:57 GMT)

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