From the desk of Willie Delwiche.
Key Takeaway: Investor sentiment surveys are showing waning optimism as 2022 gets underway but there is still little evidence of fear. From a flow and positioning perspective, the 2021 excesses have not been unwound. Equity ETFs continue to record huge inflows even as households have near-record exposure to equities and stocks trade at never before seen valuations. The resolution to these imbalances could come more from rotation than from an outright unwinding. While risk appetite in the US is fading (particularly for the speculative names that were surging higher at this time last year), currency markets suggest renewed interest in global assets. Overseas equities and commodities are gaining strength. They could provide a needed alternative if investors really start to sour on US equities.
Sentiment Report Chart of the Week: Currency Rotations Reveal Risk Appetite![](https://media-allstarcharts.s3.amazonaws.com/wp-content/uploads/2022/01/willie01122021.png)
Most of our US-based sentiment indicators suggest risk appetite among investors has been waning (though not necessarily accompanied by active re-positioning). Recent moves in the currency market tell a different story. After a year of strength in the US dollar, we are seeing hints of rotation back toward its Canadian and Australian counterparts. The Mexican Peso and Indian Rupee are also catching a bid versus the US dollar. Strength in these currencies (and corresponding weakness in the US dollar) suggests that risk appetite on a global scale might not be waning, but instead is taking renewed interest in eating abroad.