Coming back home from the snowy mountains of Åre shows how much can change in just a week: spring has properly sprung — and I suddenly feel like I’m already running late power-washing the patio.
In markets and sentiment, a lot has shifted too. The ceasefire sparked a real sense of relief — and then the blockade took some of that hope back again. My bigger-picture point remains the same, though: don’t try to predict the next twist in the geopolitical story; you can’t. What you can do is use sentiment analysis to understand where extremes are building — and where that can skew the odds of future returns in your favour.
There’s still plenty of scepticism that the ceasefire turns into lasting peace, or that markets can simply “move on” from being singularly focused on this conflict. But market stress has eased a lot across most assets — and that shows up clearly in the hundreds of indicators we track.
Our Quick Risk-on / Risk-off aggregate (high-frequency inputs only) has rebounded from 42 last week to 52 to start this week (i.e., the average indicator sits around its 52nd percentile). That’s back into net bullish territory for the first time since 3 March — basically neutral and far away from both historical buy and sell thresholds.
The slower-moving Risk-on / Risk-off aggregate (with more, sometimes monthly, inputs) tells a similar story: from a low of 49, it has recovered to 58 — also the highest since 3 March.
The biggest sentiment shifts since the ceasefire announcement are, unsurprisingly, close to the mirror image of the previous sell-off: the largest SMA increases have been in European and EM equities, followed by industrial metals and the Value and Size factors. The biggest decliners have been Utilities, Financials, and the Canadian dollar.
Top 3 This Week
- Sentiment: Sentiment back to neutral
- Geopolitics: ceasefire, blockade. If you needed a reminder: don’t predict, prepare!
- CAD: one of the biggest sentiment decliners. SMA down to 20th percentile. Still well above last year’s lows, but back on the watchlist.
Sentiment Overview
- Two more retail datapoints reinforce last week’s observation: retail sentiment has cooled a touch, but still looks remarkably unshaken — and all of these surveys were taken before the ceasefire announcement:
- STAX: Schwab clients turned slightly more bearish since the war began, but at 56 the Schwab Trading Activity Index remains well above average and the second highest in four years — a much smaller reaction than around last year’s Liberation Day sell-off.
- NY Fed consumer stock expectations: consumers now see a 36.3% chance stocks will be higher 12 months from now. That’s down from 38% the previous month and is getting close to the historical buy threshold around 35% — but still sits in the middle of the five-year range.
- Investor surveys have, by and large, been creeping higher:
- AAII Bull-Bear: only -7.3% net bearish
- NAAIM: back up to 69.4 from a low of 60
- Investors Intelligence Bull-Bear: the outlier, down again to 3.7 — but still well above the Liberation Day low (-11.8) and the historical buy threshold (-14)
- Extremes are back to skewing towards bullish sentiment:
- Bullish (>90th percentile): 11 indicators (7 last week)
- Bearish (<10th percentile): 6 indicators (7 last week)
Equity Sectors
- Most bullish: Technology
- Most bearish: Consumer Staples