May 31, 11:33 am
The AltIndex Fear & Greed Index just hit 63, its highest reading in twelve months. Greed is back in control, and the loudest signal of all is coming from retail.
For most of the past year, the Fear & Greed Index bounced between the mid-40s and low-60s. Every rally got second-guessed. This month it pushed to 63, a Greed reading and the strongest sentiment print we have recorded in a full year of daily data. What makes it worth your attention is that almost every other gauge is flashing the same color: CNN's Fear & Greed Index sits at 60, the S&P 500 closed at a record 7,519 on May 26, and the Nasdaq hit 26,656, both fresh all-time highs.
If you want to understand what is powering this move, look at Reddit. Our Reddit Mentions signal just jumped roughly 86% in a single period. That is not a drift higher. That is a vertical spike, and it is the single most extreme reading in any of our eleven inputs.
Reddit mentions are our cleanest proxy for retail investor attention, and attention is what pulls money off the sidelines. The pattern is familiar from the meme-stock era: chatter leads, flows follow, price follows flows. A near-doubling tells you the retail crowd is not just back, it is leaning in hard. That is fuel on the way up. It also tends to peak right around the moments when caution would serve investors best.
Here is the part most sentiment readings miss. Two of our signals are pulling hard the other way. Employee business outlook, the share of workers optimistic about their own company, has drifted steadily negative all year. And our revenue growth signal has rolled over from strongly positive last summer to deeply negative now. Price and Reddit are screaming Greed. The fundamentals underneath, and the people inside these companies, are not.
Valuations add to the unease. The S&P 500's forward P/E sits at 21.2, above its 10-year average of 18.9, and the Shiller CAPE has breached 40, a level last seen at the dot-com peak. The historical record is blunt: following a forward P/E above 22, the index has averaged just 7% over the next year and actually declined an average of 6% over two years. The counterweight is real earnings. Q1 saw 28.6% year-over-year earnings growth with 85% of companies beating estimates. This is not 1999. But there is little room for disappointment.
The signal to track is the gap between attention and fundamentals. When Reddit mentions and revenue growth point the same way, you get a durable trend. When they diverge like this, you get a market running on emotion, and those snap back fastest. Watch whether the Reddit spike holds, whether forward revenue signals stabilize, and whether the rally keeps climbing a wall of disbelief.
A 12-month high in our Fear & Greed Index is a real signal. But Greed describes where sentiment is, not where it goes next. The data says the crowd is optimistic. The same data says the crowd has been optimistic at exactly the wrong moments before.
Sources: AltIndex Fear & Greed Index and underlying signal data, CNN Fear & Greed Index, FactSet earnings and valuation data, AAII Sentiment Survey, CNBC market data. Index levels and stock prices are historical and for informational purposes only. This article does not constitute investment advice.
Disclosure: This article is for informational purposes only and does not constitute investment advice. AltIndex aggregates publicly available alternative data signals. Past signal performance does not guarantee future results. Always do your own due diligence before making investment decisions.
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