Key takeaway: Record highs in equity indexes buoy investor sentiment that has remained optimistic without a significant challenge over the past year. Bulls ticked higher across our sentiment indicators last week, yet we still see evidence that risk appetite is turning (NAAIM Exposure Index, NASDAQ trading volume, overall levels of options activity). These new highs and levels of optimism must contend with the undercurrents of lackluster breadth measures and an absence of pessimism. Risks lie just beneath the surface. This raises the possibility of a more complete sentiment unwind when risks are realized and prices begin to falter.
Sentiment Report Chart of the Week: Know What They Say, Watch What They Do
One of the best ways to measure actual sentiment is to watch what investors are doing with their money. Through the first six months of the year, equity ETF inflows totaled nearly $350 billion, with inflows to bond ETFs falling shy of $100 billion. Commodity ETFs have seen outflows on a YTD basis.
