It’s hard to find a more bullish start to a year than this one. There were “blockbuster” inflows of capital into stocks, as well as corporate and emerging markets bonds, according to the latest analysis by Bank of America Merrill Lynch.
After the carnage in the stock markets — it was the worst start of the year ever for U.S. stock markets — a look at capital flows can give some clues on where the markets might be headed next.
Bearishness increased for the short term (a one to two weeks horizon) while intermediate-term bullishness on US stock markets has tempered, flows data around the first interest rate raise by the Federal Reserve in nearly a decade show.
Investors are extremely bearish for the short term, just before a crucial decision by the Federal Reserve on whether it would raise interest rates or not later this week.
Exchange traded fund (ETF) traders have been positioning “aggressively” for a Santa Claus rally, but contrarian investors would say this is a negative thing for the short-term market outlook, according to analysts at TrimTabs Investment Research.
Easy credit has led to all sorts of distortions in the markets, and an obvious one has been the surge in share buybacks, which have kept stock prices elevated and have boosted earnings per share.
Investors seem to ignore the approaching of the first interest rate hike since the financial crisis by the Federal Reserve, with the mood in the markets brightening.
Investors are beginning to position for the first increase in interest rates by the Federal Reserve since the financial crisis, and it looks like the market may spend this week in the doldrums again.
An interest rate rise by the Federal Reserve was beginning to be priced in even before the better-than-expected October nonfarm payrolls figure was released last Friday.
If anyone needed confirmation that investors are back to “risk-on” mood, last week provided plenty of it.