28 October 2025
This week’s update comes to you from a Center Parcs in the Netherlands, the land of great bicycle lanes and meat croquettes. An addition to this the Heatmaps this week comes in the form of flow indicators for Japanese equities.
Top 3 This Week
- Sentiment is grinding bullish again, but not yet back at the levels reached in early October.
- Most Bullish Tech Sentiment in 8 Years heading into earnings season.
- Brazilian Real is the currency with the most bullish sentiment.
Sentiment Overview
- The S&P 500 has digested its recent pull-back and returned to previous highs, but sentiment hasn’t fully recovered.
- This is typical: sentiment resets quickly during downturns but climbs more slowly during rebounds. The second approach to old highs rarely feels as exciting as the first, and it often takes a meaningful new high to push sentiment above prior peaks.
- On our –3 to +3 scale, sentiment sits around –1 — a mild headwind for the rally, but not yet a major obstacle.
- The Heatmap has risen to 59, its highest since the recent correction, though still well below the early October highs (64), the 2024 peak (66), and the historical sell threshold (73). Historically, this zone corresponds to below-average 12-month equity returns.
- Indicator changes: 33 moved in a bullish direction vs. 23 bearish.
- Four indicators are near bearish extremes (below the 10th percentile), all linked to political and geopolitical risk. While geopolitical risk has been a useful contrarian signal in the past, political uncertainty has not.
- Eight indicators are now at bullish extremes (above the 90th percentile).
- The VIX is back down to 15, a level historically followed by average forward returns. The VIX only becomes interesting as a contrarian signal once it breaks above 35–40.
- The AAII Sentiment Survey ticked up alongside stronger equity markets but remains modest at 6% net bearish — below both the +10% seen a few weeks ago and any historical sell thresholds.
Equity Sectors
- Most bullish: Communication Services
- Most bearish: Health Care
- Tech continues to dominate everything — market cap, earnings, valuations, and sentiment. Tech and Communication Services remain the top two sectors in our Sentiment Ranking, consistent with the Buy-Side Sentiment Tracker.