MW How exploding investor euphoria and leveraged ETFs turned one stock-market bull cautious

By Barbara Kollmeyer

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

A stock-market bull at Barclays is now 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 the global head of equity tactical strategies at Barclays, Alex Altmann, has him 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 was in its early days. Following that advice would have required nerves of steel as the market initially pulled back at the outbreak of war but then paid off as stocks surged to record highs moving into June.

Altmann is now urging a shift to a short-term tactically cautious view on U.S. stocks, he told a Barclays 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 overexuberance on both Wall Street and Main Street. "We can see that retail euphoria is as high [as], 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 euphoria among individual investors, 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 those based on 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 renewed interest in momentum trading, in which 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 by the S&P 500 of around 6% or 7% - which he sees as possibly halfway done already due to recent drops. The index SPX was down 2.9% from its June 2 record close as of Tuesday.

As for what would make the strategist more bullish, he'd like to see lower stock prices to help flush some of that investor euphoria out of the market and to see those big upcoming IPOs "get digested well in markets." Another thing he'd like to see: real yields easing off.

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

The markets

Pressure is building on U.S. stock futures (ES00) (YM00) (NQ00), with tech leading the way south, the 10-year Treasury yield BX:TMUBMUSD10Y is rising and gold (GC00) and silver (SI00) are tumbling. Oil (CL.1) (BRN00) has turned higher.

 
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

Iran must to pay for taking too long to agree on a deal to end the conflict, President Donald Trump posted on his Truth Social media account. His remarks follow fresh clashes between the U.S. and Iran after the downing of an Apache helicopter near the Strait of Hormuz.

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

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

Super Micro Computer's 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 quarterly results 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 poll ratings of negative 18% for ICE and negative 12% for 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," the analysts said. AI could see a "self-imposed regulation or a slowdown in development" to allow more time to adjust to its implications, though they identify no evidence of broad labor-market disruption from the emerging technology.

Top tickers

These were the most-searched ticker symbols on MarketWatch as of 6 a.m.:

 
Ticker  Security name 
NVDA    Nvidia 
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TSM     Taiwan Semiconductor Manufacturing 
AMD     Advanced Micro Devices 
GME     GameStop 
AAPL    Apple 
PLTR    Palantir 
INTC    Intel 
MRVL    Marvell 

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-Barbara Kollmeyer

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June 10, 2026 07:40 ET (11:40 GMT)

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