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As investors get more confident about the latest leg of the stock market rally, one Wall Street strategist is growing more concerned.
"This is kind of how bull markets end," Savita Subramanian, equity and quant strategist at Bank of America Merrill Lynch, told CNBC during an interview Tuesday. "What we're in right now is this sort of euphoria around stocks that's been missing for this entire bull market."
Indeed, the run that began in March 2009 often has been declared "the most hated bull market in history, " due largely to the lack of investor participation.
However, Subramanian said she feels the tone is shifting. Wall Street pros like her are moving more money to equities, companies are starting to pull back on share repurchases as stocks get more expensive, and investors are demanding more from companies when they report earnings.
"People are starting to buy the dream that stocks can go up," she said. "This is what I worry about. It's not the age of the bull market, cause bull markets don't die of old age. It's just a lot of the things we're looking at look very late-cycle."
One of the main things Subramanian pointed to was investor reaction to quarterly earnings reports.
Heading into this week, 81 percent of companies had beaten profit expectations, after 73 percent had done so in the second quarter. In both quarters, investors have had muted reactions to earnings beats. Where shares of those outperforming companies would be expected to rise, they have had almost no reaction.
In fact, companies that beat earnings in the second quarter actually averaged a slight decline in the two days after reporting.
"There has been no reward for earnings beats, which is a little bit weird," Subramanian said. "The bar's getting higher. Investors are expecting good news. When they got good news, it's already in the stocks."
Investor behavior and sentiment have shown additional signs of optimism.
Cash balances for fund managers have fallen to 4.7 percent, the lowest in two and a half years. At the same time, investors have poured $236.7 billion into stock-based funds, with last week's inflows of $11.6 billion the most in 17 weeks. Investors even put $2 billion into mutual funds, the first time in 11 weeks that active strategies have attracted money, according to BofAML and EPFR data.
The flows reflect how much more optimistic professional investors have turned.
Bulls in the latest Investors Intelligence survey are up to 60.4 percent, which editor John Gray considers the "danger zone." Moreover, he said current patterns are starting to look a lot like 1987 as the market nears the 30th anniversary of Black Monday.
Specifically, he said bulls peaked above 60 percent that year, fell, then moved above 60 again later in the year as the market was about to crash.
"That scenario suggests potential significant danger for Oct/Nov 2017!" Gray wrote.
BofAML has been among the most cautious firms on Wall Street, holding a 2,450 S&P 500 price target that would represent a 4 percent decline from the current level.
Generally speaking, Subramanian said she finds it "very unsettling, the fact that fundamentals aren't driving the bus."