Bullishness is broadening out, but overall investor sentiment remains well below pre-war levels — and even below mid-April levels.
Both of our Risk-On / Risk-Off aggregates have been climbing: the faster-moving version based only on daily and weekly inputs, and the broader version that also includes slower-moving monthly indicators.
But at the 57th and 58th percentile respectively, both remain below mid-April levels, below pre-war levels, below the January highs, below the 2025 highs, and well below levels that have historically been followed by consistently poor equity returns.
The point is simple: investor sentiment is slightly bullish overall, but it is not euphoric.
That remains a supportive sentiment setup for risk assets — unless you have a bearish macro view, for example on the economic cycle. A bear case would need to be built on something other than excessive investor bullishness.
But the lack of extremes in broad investor risk appetite does not mean there are no pockets where sentiment temperatures are getting very hot. The muted aggregate picture hides some significant extremes beneath the surface.
The message from our recent Sentiment Ideas note on the extreme sentiment divergence between secular growth assets around the AI ecosystem and cyclical growth assets such as Industrials, US Value and European equities remains very much intact.
This has not been an everything rally. And sentiment reflects that.
Bottom line: Sentiment is only slightly bullish overall, which is supportive from a market perspective. Bullishness remains concentrated in specific parts of the market.
Top 3 This Week
- Sentiment: only slightly bullish
The overall sentiment setup remains supportive for risky assets. But bullishness is not evenly spread across markets.
- Brazil sentiment has swung to extremely bearish
The average indicator in our Heatmap was at the 89th percentile only a month ago. It is now down to the 6th percentile. Historically, this has been followed by outperformance at a high hit rate.
- Commodities are grinding more bullish
Our Commodity SMA is now around the 67th percentile, its highest level in four years. The long-standing bifurcation in commodity sentiment is turning into broader-based bullishness. Not yet a warning flag, but worth watching.
Sentiment Overview
- The gap between investor surveys has widened to an extreme degree. It has only been larger 3% of the time. But despite the divergence, none of the main surveys are at historical buy or sell trigger points.