By Paul R. La Monica

The S&P 500 is up nearly 7% this year. And look at chips. Micron, Intel, Advanced Micro Devices, and South Korea's SK Hynix have all more than doubled since the beginning of January.

There is arguably too much complacency on Wall Street. Iran, AI spending, inflation, tariffs, the prospect of a Fed rate hike. The market hiccups, but gets over it.

You can see this smug ease in Citi's Panic/Euphoria Model, a gauge of sentiment now called the Levkovich Index. Citigroup officially renamed the model in 2021 to honor Tobias Levkovich, Citi's late chief U.S. equity strategist and one of the model's creators.

A year ago, the weekly index -- it measures nine things, from margin debt to trading volume to short interest -- had a reading of 0.19. The car was in neutral, so to speak. For context, anything above 0.38 is euphoria, anything below -0.17 is panic.

Today, the model is nothing short of giddy. Just last Friday, the index hit 0.93, its highest level since the post-Covid rally five years ago, said Scott Chronert, Citi's head of U.S. equity strategy.

This exhilaration isn't far from where it was just before the dot.com bubble popped in 2000.

And there's no evidence of it letting up. Plus, there are other signs that investors are excited -- and aren't scooting away from riskier assets like options and chip stocks.

JPMorgan, for example, points out that more leveraged single-stock exchange-traded funds, which use options to magnify returns, were launched in the past year than for any other category. Many were tied to top AI stocks like Sandisk, Lumentum, and IREN.

One fan of value stocks, Brian Kersmanc of GQG Partners, is worried about what he called the "complete euphoria" for all things AI, but conceded that "calling a top is extremely hard to do."

Chronert's advice is simply to proceed with caution. The index this high often is a red flag that stocks are overpriced -- and about to drop. When everyone is this giddy, the median decline for the S&P 500 over the next 12 months is 13%.

The tricky part is knowing when to stay and when to go.

"The issue with using this as a timing tool is that the market is up more than it is down," he said.

Stocks can "exist in euphoric conditions" until they have a concrete reason to fall, Chronert said. Merely being expensive isn't enough to trigger a pullback.

Citi actually expects the market to keep forging ahead. It even raised its forecast for the S&P 500. The new target is 8,100 by year's end, up from 7,700. The new target values the index at a little more than 20 times Citi's 2027 earnings per-share forecast for the index.

There's a rationale behind the new number: profit growth. It remains strong, Chronert said, in large part because the AI spending "supercycle" is still in its middle stages.

Are you unabashedly giddy? Maybe you feel good but also wonder whether things are too good. Or maybe you just see dark clouds.

You have to make the decisions that you can live with. Just remember, sometimes something is just what it is.

Write to Paul R. La Monica at paul.lamonica@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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June 10, 2026 13:41 ET (17:41 GMT)

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