Radar Perene / Archive / article

Euphoria at its peak. The breach, too.

◦ Written under index methodology v1 (in effect until 15 Jul 2026). The current series is v2 — readings quoted here may differ from those shown today. See the methodology.

Article

The extreme

Some markets celebrate loudest precisely when they have the least cause to. In May 2025 — the year of euphoria under rates at fifteen — mood did more than withstand the bad news coming from inside the exchange: it dug deeper into optimism in the very month the sector that holds up the index collapsed. Sentiment was rising, the foundation was buckling, and the two moves pointed in opposite directions. In numbers: the Ânima Index climbed from 77.5 to 84.7, deepening the extreme optimism, while the Financials/IBOV ratio, which had been running above its average, collapsed in four weeks to a depth the archive almost never records — the capitulation of the index's heaviest bloc. The intermarket structure sank from 32.62 to 13.43, a hard risk-off, with the Selic at 14.75% a year. Banks and insurers, the anchors of the exchange, turned into what bled most inside it — and the thermometer never recorded the blow.

What rhymes

Nine months earlier, the same mismatch had already rehearsed its first stanza. In August 2024, the mood indices were putting themselves back together after a stalled half-year: risk appetite rose from 52.9 to 64.0 and the sentiment thermometer leapt from 30.3 to 60.6, both back to neutral. Beneath that recovery, the microstructure was liquidating the cycle at the greatest intensity of the year — the Cyclical/Non-Cyclical ratio sank ever further from its average, and real estate funds followed, just as depressed against the index. The letter from that month captured the paradox in a single line: "the investor had gone back to accepting risk without going back to believing in the cycle." Mood was improving; conviction was not. Selic at 10.5% a year, the dollar at R$ 5.55, and idle cash paid far too well to demand any faith in growth.

What misled

The easy reading, in both months, was to trust the thermometer. In 2025, a mood at the top suggested comfort; in 2024, two axes back at neutral suggested a release. Neither surface told what the structure was doing underneath — and it is the structure, not sentiment, that records where capital actually moves. But the record grants no license for the reverse reading either, the one of prophecy. When November 2024's horizon came due, the return was 8.4%, a hit — resting, however, on just five comparable episodes, with paths ranging from 2.4% to 13.8%. The divergence between euphoria and foundation is an observable fact, not a stopwatch. The archive says only that these configurations tend to resolve less comfortably than the thermometer promises — without pinning down when, or by how much.

Honest verdict

Twice, euphoria stood at its peak in the same month the internal breach did too. The regularity surfaces only when the episodes are set side by side: in isolation, each looks like one more month of mood detached from the flows; together, they trace a pattern. Euphoria that ignores internal deterioration rarely ignores it for long. What the reading gets right is the diagnosis — the distance between what the market feels and what it does was real, and wide. What it does not do is mark the hour the bill comes due. The top of mood and the bottom of the foundation coincided; the rest, the record leaves open.

Continue the story: Mood and structure, when they disagree · The sector that led and began to bleed →

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Read also: The disagreement repeats. The outcome, never the same. · The index's anchor is what sinks deepest.

Characters: Mood · Structure (intermarket) · Cyclicals × defensives