While equities have been trading sideways around all-time highs, sentiment has also been moving sideways — but well below its bullish highs.
The overall message from the risk-on/risk-off indicators we track is still one of, at most, slightly bullish investor sentiment.
Our higher-frequency aggregate has slipped below the 50th percentile, meaning fewer than half of the indicators are now above average. The slower-moving full aggregate is only slightly higher, at the 52nd percentile.
Across the breadth of indicators, sentiment is less bullish than it was before the war with Iran, less bullish than at the start of the year, and less bullish than through much of the period since last summer.
Without a strong sentiment steer in either direction, this is an environment where your macro view should do the heavy lifting on risk appetite. With a constructive global growth outlook and low recession risk, there is nothing in the sentiment picture that argues against a risk-on position.
That said, there has been more movement beneath the surface.
Tech’s underperformance has knocked it out of the “most popular sector” position for the first time in what feels like ages. On the regional side, European equities are back to having net bullish sentiment. And in FX, the dollar’s rise and GBP’s decline are reaching new cycle extremes.
Top 3 This Week
1. Sentiment: surprisingly neutral
There is no sign of excessive bullishness. Rotation rather than risk-off has been the name of the game.
Options-based indicators have cooled sharply, while some surveys have turned more bullish. The result is a mixed picture rather than a clear sentiment warning.
2. Tech sentiment correction
Tech sentiment has fallen sharply, but it has not washed out.
The SMA has dropped to the 73rd percentile, well below recent highs, but still far above true capitulation levels.
3. GBP sentiment getting very bearish
GBP sentiment has continued to move in a more bearish direction and is now approaching historical buy-threshold levels.
With plenty of political news flow ahead, this is becoming an increasingly interesting one to watch.
Sentiment Overview
The surveys have taken a more bullish turn, moving against the broader cooling in sentiment. All three surveys moved in a bullish direction.