BofA FMS: Investors most overweight Euro since January 2005 | Forexlive

• Investor sentiment most bullish since February 2025
• Record surge in risk appetite past 3 months
• Cash levels fall to 3.9%, ‘triggering sell signal’
• Sentiment getting ‘toppy’, ‘greed always much harder to reverse than fear’
• Trade war remains biggest ‘tail risk’ for investors
• 26% say Bessent most likely to be the next Fed Chair, 17% Warsh, 14% Waller, 7% Hassett

One had to just look at the charts to ‘gather’ such intelligence. The euro’s surge has been very aggressive which got the ECB policymakers a bit worried as it could negatively affect inflation.

The risk appetite has also been pretty clear by just looking at the parabolic rise in equities and cryptocurrencies. There are certainly ‘toppy’ signals here and there but without a catalyst, markets can generally extend much further than one can remain solvent.

I don’t see the trade war as the biggest risk. In my opinion, the biggest risk is inflation. The trade war could become a risk once higher tariffs get implemented without any delays, deadline, pause and so on. If they stay in the 10-20% range, the market could likely swallow that (even though the 10% is the baseline scenario).