In spite of the S&P 500 actually reversing course and heading higher in the past week, sentiment on the part of individual investors surveyed by the American Association of Individual Investors has turned lower, once again falling below 20%. That is the first sub-20% reading since the last week of April, although the multiple readings in the mid-teens last month were lower than this week’s reading.
The past several months as the major indices have entered downtrends have seen an impressive collapse in optimism. Over the past six months, slightly more than half of the time less than a quarter of AAII respondents have reported as bullish. Going back through the history of the survey beginning in the late 1980s, there have only been two other periods with this same sort of consistently pessimistic attitude for an extended period of time: late 1988 to early 1989 and two years later in early 1991.
Given bulls were hard to find, bearish sentiment ticked up to 53.5%. Although over half of respondents are expecting lower stock prices, that is still not as high of a reading as the end of April when it was nearly 60%.
Regardless, bears continue to heavily outweigh bulls as the bull-bear spread has now sat in negative territory for all but two weeks over the past half-year.
The bearish camp did not pick up all of the losses in bullish sentiment. Neutral sentiment rose back up to 26.7% this week marking the highest reading in a month. That being said, the reading remains below the historical average of 31.43%. Click here to learn more about Bespoke’s premium stock market research service.
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We’ll be honest, based on the way markets have been trading the last couple of months, we would have expected that if the 7th largest stock (NVIDIA) in the Nasdaq 100 was trading 5% lower in reaction to earnings, that futures for the index would also be lower. Right now, futures are actually trading about 0.4% higher. Is this real?
In addition to the positive tone in futures, there’s also some major M&A news with Broadcom (AVGO) reaching a deal to acquire VMware (VMW) in a cash and stock deal valued at $61 billion in what would be one of the largest tech mergers of all time. On the one hand, a bull would point to this transaction as a sign that companies are finding value in the market after the plunge over the last five months. On the other hand, as recently as February, VMW’s stock was right around the $142.50 price the company agreed to sell itself at today, so does that indicate that management expects limited upside for the industry going forward?
It’s a big morning for economic data with revised GDP for Q1 (revised lower), Personal Consumption (higher than expected), PCE (lower than expected), and Jobless Claims (initial lower than expected, continuing higher) all just released at 8:30. Later on this morning, Pending Home Sales and the KC Fed manufacturing report will be released at 10 AM.
In today’s Morning Lineup, we recap morning earnings reports (pg 4), overnight central bank actions (pg 4), the latest economic data out of Asia and Europe (pg 5), and a lot more.
The Energy sector hit another new 52-week high yesterday further cementing its lead as the top-performing sector in the S&P 500. Given the rally over the last year, it’s pretty hard to believe that the Energy sector is still more than 10% below its record high back in 2014.
Given the rally in Energy, the sector’s relative strength has made a significant turnaround this year. After eight years of near-constant underperformance, the recent outperformance has taken its relative strength to levels not seen in three years.
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we start out tonight with some notes on today’s release of the Fed’s meeting minutes (page 1). We then recap today’s 5 year note auction (page 2) followed by a look into the durable goods numbers (page 3). Pivoting back to fixed income, we then take a look at credit spreads (page 4). We finish with our weekly recap of EIA stockpile data (page 5).
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In this week’s report we look at the technical shift in the trend for interest rates.
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