Goldman Sachs analyst Andrea Ferrario told clients in a note on Tuesday that investor sentiment has surged to its strongest point in years, with the firm’s Risk Appetite Indicator rising to 1.09, the “highest level since 2021” and in the “98th percentile since 1991.”

The bank noted that the gauge “remained elevated despite more policy and geopolitical uncertainty” and reflects broad-based risk-on positioning across global markets.

According to Goldman Sachs, 17 of the RAI’s 27 inputs are above 0.8 in z-score terms, with the most bullish signals coming from “Small vs. Large cap, EM vs. DM equity, Bonos spreads, and AUD/JPY.”

The analysts noted that gold remains the main outlier, and “excluding Gold the RAI would be almost 1.2,” indicating even stronger underlying risk appetite.

Ferrario stated that the bank’s PC1 “Global growth” factor was the main driver of the latest upswing and that positioning and sentiment indicators also remain “at bullish levels.”

The firm highlighted that such elevated readings are historically rare, with only “6 instances when the RAI went above 1.0 since 1991.”

Looking ahead, the analyst said history shows that equities “delivered positive returns in the subsequent 12 months” following a move above 1, though gains typically “slowed down after about 6 months.”

Goldman stressed that a high RAI “alone is not a signal to turn bearish,” as performance depends heavily on the macro backdrop. Equity returns tend to stay positive “as long as the RAI remains elevated,” with downside risks increasing only once the indicator “dropped below 0.”

Goldman Sachs remains “modestly pro-risk” for 2026, with an overweight in equities and selective hedges for both downside and upside growth risks.