Barclays strategists are sounding alarms over a proprietary gauge of market exuberance that has surged to its highest level in roughly two decades.
The equity euphoria index, developed by Barclays strategists led by Venu Krishna, measures the percentage of stocks currently trading in what the bank calls “euphoric territory.”
The indicator recently climbed to 10.7%, a level last seen during the dot-com bubble of the early 2000s and the meme stock frenzy of 2020 and 2021.
The index draws on derivatives flows, volatility technicals, and options activity to quantify the intensity of crowd behavior in financial markets.
“Interestingly, with many drawing parallels between the AI revolution and the 2000s Tech bubble, the EEI is the most stretched since then, warranting some caution,” Barclays analysts noted.
The furious rally in US stocks from the depths of April’s tariff-driven selloff triggered a swift jump in the euphoria indicator, swinging it back into double digits for the first time since February.
Barclays strategists flagged that individual stocks simultaneously rising in price and in volatility is a “hallmark of upside chasing,” a dynamic now clearly visible across multiple sectors.
Retail traders have increasingly turned to leveraged ETFs and short-term options contracts, effectively pushing volatility further out along the curve while amplifying near-term price swings.
According to The Kobeissi Letter, zero-day-to-expiration options accounted for 67% of total SPX options volume on May 6, 2025, marking an all-time high and representing a tripling in volume share over just three years.
The rising complacency underpinning the current bull market is also visible in a compressed VIX, tighter high-yield credit spreads, renewed meme stock activity, and a resurgence in special purpose acquisition companies.
While these speculative signals are traditionally viewed as contrarian warnings by seasoned investors, they also tend to sustain bullish momentum for as long as the rally remains intact.
The tension between those two realities is precisely what has pushed at least one previously optimistic market observer toward a more cautious stance heading into the second half of 2026.
