Happy New Year and welcome to the first full Heatmap Update of the 2026.
From a markets perspective, the Christmas break was relatively quiet. Geopolitics around Venezuela dominated headlines, but the immediate market impact has been limited. The answer to the key investor question — “Does this affect S&P 500 profits?” — is clearly no. The implications are longer term, tied more to the erosion of international norms than near-term earnings.
As a result, we enter 2026 with a familiar sentiment backdrop: moderately bullish, but not yet an obstacle to further equity gains — provided macro conditions remain stable.
Top 3 This Week
- Sentiment: Moderately bullish, not yet a headwind for equities
- Technology: Sentiment indicators reach new 15-year high
- NZD: Becomes the currency with the most bearish sentiment
Sentiment Overview
- Overall sentiment remains moderately bullish, supportive of risk assets as long as macro conditions stay constructive.
- The average indicator in our Risk-On / Risk-Off Heatmap sits just above the 60th percentile — clearly bullish, but below October’s peak of 65 (a level also reached several times last year).
- Historically, this zone has been associated with slightly below-average 12-month returns, without a strong directional skew. Sentiment only becomes a clearer headwind above ~70.
- At the extremes, sentiment remains mildly skewed bullish:
- Bullish (>90th percentile): 9 indicators
- Bearish (<10th percentile): 5 indicators
As usual, four of the bearish extremes are uncertainty indicators with a weak track record as contrarian signals.
- CFTC note: Futures and options data is being published again post-shutdown, but historical backfill will not be complete until 23 January.
Equity Sectors
- Most bullish: Technology
- Most bearish: Health Care
- Technology remains firmly at the top of the rankings, with Information Technology ahead of Communication Services — a familiar picture.
- Info Tech sentiment continued to drift higher despite already lofty levels and despite underperforming the broader market since October.
- The average indicator now sits at the 77th percentile, close to the highest levels seen in 15 years.
- Health Care has modestly outperformed since summer, but sentiment remains deeply bearish. Buy-side views show only marginal improvement, while Schwab flows and sector ETF market share remain below their 10th percentiles.
- Materials sentiment has taken another step higher and is one of the biggest improvers of recent months — rising from the low-20s percentile to around 56, now firmly in net bullish territory reflecting a meaningful shift visible across multiple indicators.
- Energy sentiment has improved to its least bearish level in over a year, now close to the 50th percentile, though this has not yet translated into meaningful outperformance.
- Utilities: Sentiment has slipped back into net bearish territory, driven mainly by CFTC positioning (still slightly delayed). Buy-side sentiment remains cautious.