Spencer Platt/Getty Images
A person dressed as a bear outside of the New York Stock Exchange.
"[W]hen you view the US equity market through the prism of investment style performance, you can see that investors are positioning themselves EXACTLY as you would expect if faced with an economic deceleration," Societe Generale's Andrew Lapthorne writes.
He noted that stocks are staying high because investors are leaving other asset types. Commodities have cratered and emerging markets have tanked, leading investors to flee to safer ground.
"So as we have highlighted many times before, investors may be buying equities because they have few alternatives, but they are clearly economically bearish," Lapthorne wrote.
More importantly, however, is the way that investors are shifting to stocks. They are putting money into "high quality" stocks, those that are considered less risky or less volatile, at an increasing rate.
"'High versus low quality' based stock selection strategies witnessed some very strong, so would say extreme, performance across all regions in July," said Lapthorne.
Additionally the performance of the quality index has matched up with price momentum, which is not a good sign.
"Quality is now essentially price momentum and vice versa, and history tells us when these two strategies collide the omens are not usually good, as it is a phenomena usually associated with equity markets turning bearish," wrote Lapthorne.
Putting all these factors together, Societe Generale's indicator for factor performance shows that the probability of a bear market is at its highest since the Great Recession.
Societe Generale