Displaying items by tag: indicator
Here is a Reason for Optimism on Stocks
(New York)
There are a lot of reasons to be bearish on stocks right now. Aside from worries about rates and a recession, there is the big issue of a potential trade war to consider. However, there is at least one reason to be optimistic—the overall pessimism of investors. In one of the classic contra indicators, contrarians often see market pessimism as a strong buy signal. Investor sentiment has abruptly swung from very bullish to strongly bearish, with negative sentiment its highest in seven months. A strategist at BNP Paribas commented that ““There’s more of an extreme fear reaction now … As a contrarian indicator, that makes me actually bullish”.
FINSUM: We don’t think this signal means anything other than investors are afraid of rates rising, a recession, and a trade war. Since all of those things could come true regardless of how investors feel about stocks, we don’t believe there is much significance to this.
Bank of America Warns of Big Sell Off
(New York)
So those following the news will have noticed that Bank of America’s key stock market indicator, the “Bull & Bear”, has been flashing red for the last couple of weeks. Now, the brightness is getting stronger. The recent rush out of Treasuries and into stocks has been the fastest ever, which has BAML worried that markets are about to crash. The rotation amounted to $102 bn flowing into stocks in January alone, which BAML calls “massive”.
FINSUM: The move has been more of a stampede than a flow, but then again, there are a lot of reasons to be worried about rising rates, especially as new Fed leadership is coming in.