Bets against U.S. stocks haven’t been this low since last October -- just before the deepest sell-off in a decade.

Short sales in the SPDR S&P 500 ETF Trust as a percentage of shares outstanding fell to just 2.6% this week, according to data from IHS Markit Ltd., signaling optimism that American equities can push back toward all-time highs. But the setup has some investors on edge.

“Is it another sign of complacency? Smells like it,” said Yousef Abbasi, global market strategist at INTL FCStone. “The market is being stubbornly optimistic in the face of several headwinds. It does feel dangerous.”

There’s certainly reason for optimism. Evidence that two of the largest market overhangs -- a U.S.-China trade war and Brexit -- could be resolved has pushed U.S. equities within 1% of a record. The S&P 500 added 0.4% as of 11:22 a.m. in New York.

“Cyclicals have room to move higher relative to defensives in 4Q,” Evercore ISI’s Dennis Debusschere, the firm’s head of portfolio strategy, wrote in a note to clients Wednesday. “A strong equity market showing in 4Q is more dependent on investors discounting lower odds of a recession rather than a material increase in expectations for economic growth.”

A similarly bullish setup last year ended poorly, and Morgan Stanley’s Mike Wilson warned earlier this week that the next few months could resemble the rout that sent the S&P 500 lower by almost 20%. The bulk of the decline came after short positions on the SPY exchange-traded fund nearly evaporated.

This year, cash has also flowed into leveraged products that bet on higher equity volatility. The VelocityShares Daily 2x VIX Short Term ETN added $110 million earlier this week, the biggest one-day inflow since March.

“We fully expect Friday to mark the near-term highs and the next few weeks/month to resemble what we saw last December,” Wilson wrote in a note.

This article was provided by Bloomberg News.