Recently, institutional investors' risk appetite has reached its highest level since 2017-2018, even hotter than at the end of 2024. According to various survey data, the proportion of net bullishness has long hit the limit, and the US stock sentiment indicator has even surged to an extreme number like 9.3.

The story behind this is quite clear: nearly 60% of institutions expect a soft landing for the economy, with only 3% still worried about a hard landing. More tellingly, institutional cash reserves have fallen to a historic low of 3.3%—which means a large amount of funds are fully allocated into stocks and high-yield bonds, these risk assets.

But there is a hidden risk here. Historical experience repeatedly shows that when everyone is on the same boat and cash is almost zero, the market is very prone to a "crowded long" situation. Once earnings fall short of expectations or policy surprises occur, there are no new buyers to absorb the sell-off, and the selling pressure will be immediately amplified. The chain reaction could be even more intense than expected.

Looking ahead, the expected return of the global stock market in 2026 is around 11%, but this growth rate will be significantly lower than in 2025. Meanwhile, US stock valuations are already at a mid-to-high historical level, indicating that the room for further rise is not that large.