Optimism among investors in U.S. stocks has risen to levels that foreshadowed the year’s worst rout, prompting Citigroup to warn that another pullback may be in the offing.

The firm’s panic/euphoria model, tracking everything from margin debt to options trading and newsletter bullishness, just showed sentiment climbed to extreme levels for the first time since January. Such readings have preceded equity losses over the following 12 months 70 percent of the time since 1987, more than three times the random probability.

The fastest economic expansion in four years, two consecutive quarters of 24 percent earnings growth and record buybacks are fueling confidence in the bull market, which by some measures has surpassed the dot-com era’s as the longest in history. With too many bulls chasing the rally, Citigroup’s strategists led by Tobias Levkovich are urging investors to cut back risk as Friday’s labor-market report could spark a selloff, just as it did in February.

“The potential for faster wage gains could generate another 5 percent pullback this time, as might Fed policy, geopolitics, trade sanctions, and international economic weakness,” the strategists wrote in a note late Tuesday. “It is always challenging to pinpoint the catalyst, but the vulnerability now exists.”

Levkovich isn’t alone flagging potential dangers after the S&P 500 ended August with five straight months of gains. Binky Chadha, chief global strategist at Deutsche Bank, predicted a retreat of 3 to 5 percent in September, citing the month’s poor seasonality and the prospects of more economic data missing expectations. Moreover, companies will likely provide little support with earnings season not starting until October and the buyback blackout period approaching, he said.

Earlier this week, Morgan Stanley strategists led by Andrew Sheets lowered their recommendation on U.S. equities, citing the S&P 500’s “extreme divergence” with other risky assets from the rest of world, peaking profit growth and a slew of risk events over the next two months, including Fed meetings and U.S. midterm elections.

This article provided by Bloomberg News.