From the desk of Willie Delwiche.
Key takeaway: The evidence continues to suggest we have recently undergone a healthy unwind in excessive optimism. Investment manager’s equity exposure has dramatically pulled back from extreme readings but remains above levels that signals a shift toward risk aversion risk that can weigh on price. Combining that with budding optimism among individual investors and a supportive, neutral backdrop in sentiment arises. Though global markets lack strength from a tactical perspective, the message remains digestion over deterioration given recent breadth thrusts and that the majority of international markets are in uptrends. For now, the reset in sentiment provides upside potential for both optimism and price.
Sentiment Chart of the Week: Risk Appetite Remains Healthy
The recent unwind in optimism has been met with sustained risk appetite levels. Both High Yield Bonds and Copper hold above key levels relative to their safer alternatives, suggesting a market environment characterized by digestion, not deterioration.
