Even though the rally in the S&P 500 lost steam over the past week, sentiment has soared.  The latest weekly survey from The American Association of Individual Investors (AAII) showed 51.6% of respondents reported as bullish, up from 42.5% in the week prior.  That’s the first time in five weeks that the majority of respondents have been bullish.

Considering there was an even more elevated reading of bullish sentiment only a little over a month ago, it is worth mentioning how optimism has been consistently elevated recently. As shown below, a one-year rolling average of bullish sentiment shows that this week’s reading increased to 42.5% – the highest reading since October 2007. It is also a quick turnaround versus various points last year when it was down around the lowest levels on record.

While bullish sentiment is elevated, less than a quarter of respondents considered themselves bearish.  At 23.7%, this week’s reading was also the lowest in five weeks. That’s also a quick turnaround from the more elevated reading of 37.5% reached only two weeks ago, and the 13.8 percentage point drop over the past two weeks is the largest decline in such a span since the week of November 16, 2023.

Those corresponding moves to bullish and bearish sentiment resulted in the bull-bear spread rising to 27.9.  Based on the comparisons to bullish and bearish sentiment, again this is the most elevated reading in five weeks. Zooming out, that reading is elevated ranking in the 88th percentile of all weeks since the start of the survey in 1987.

In today’s “$10,000 in…” series, we’re taking a look at the gold ETF (GLD).  The SPDR Gold Trust (GLD) began trading nearly 20 years ago in November 2004.  It marked the first time that investors could easily allocate funds to gold in a brokerage account.

When GLD began trading on 11/18/2004, it had total assets of just under $600 million after its first day of trading.  By the end of 2004, AUM had more than doubled up to more than $1.3 billion.

Today, GLD has more than $68 billion in AUM.  At its last quarterly filing, it held more than 26 million ounces of physical gold valued at more than $62 billion.

So what would a hypothetical $10,000 investment in the GLD ETF on its release date in November 2004 be worth today?  As shown below, $10,000 would now be worth roughly $52,000.  That’s an annualized return of about 8.73%.  Not bad for a piece of metal, right?

How does that $10k investment in GLD when it began trading nearly 20 years ago compare to something like the stock market?  If we use the S&P 500 ETF (SPY) as a proxy for US large-cap stocks, a $10,000 investment in SPY on the same day that GLD began trading back in November 2004 with dividends re-invested would be worth about $68,725 today.  That’s an annualized return of roughly 10.2%, or about 1.5 percentage points better than GLD annually.  You can see how both GLD and SPY got to their current levels in the chart below.

As always, past performance is no guarantee of future results!

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Last year when mortgage rates and gas prices were rising steadily day in and day out to multi-decade highs, we created our MORTGAS Misery Index that is simply the sum of the 30-year fixed mortgage rate and the cost of a gallon of gas.

Below is an updated look at both gas prices and mortgage rates.

The national average 30-year fixed mortgage rate according to Bankrate.com is currently down to 6.86%, which is the lowest level seen since seen May 11th, 2023.  As shown below, the peak for mortgage rates during the current cycle was 8.09% on October 25th, 2023.

Longer term, of course, mortgage rates remain very elevated.  They would need to fall another 40 basis points down to 6.45% to get back to the peak readings seen in the mid-2000s prior to the Financial Crisis.

Gas prices have also been falling steadily since peaking in the spring (which is usually the case from a seasonal perspective).  Using AAA’s national average for a gallon of regular unleaded, gas prices are currently at $3.387/gallon.  That’s down about 30 cents from the peak price seen so far in 2024 of $3.679 on April 18th.  Prices are down about 50 cents from their September 2023 peak of $3.88/gallon.

Longer-term, gas prices are currently about 50 cents above the 20-year average of $2.89/gallon.  The low-point of the current decade came on April 28th, 2020 when the national average hit $1.768/gallon.  The high point came on June 13th, 2022 when prices ticked just above $5/gallon ($5.016).

Combined, our MORTGAS Index currently sits at 10.2.  As shown below, the index is down 1.46 points from its record high of 11.66 seen in late 2023, but it’s still extremely elevated relative to the last 20 years.  Looking on the bright side, the index is now back below its peak seen in 2008 during the Financial Crisis, but we’re going to need to see significant further easing to get back to the 20-year average of 7.62.  A drop like that would likely mean mortgage rates falling at least into the 4-5% range and gas prices remaining closer to a 2-handle than a 4-handle.

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