News & Research

Investor sentiment declined sharply again last week in all markets we track except China. US investors regained their leadership role as the most negative investors with sentiment there falling deeper into bearish territory.

Worries about inflation and higher interest rates pressured investor sentiment globally, halting and even reversing its recent rise in most markets. US investor sentiment declined, ending the week with one foot in bearish territory.

Decomposition of the ROOF Ratios (both Style and Sector variants) show that the main driver of this past week’s increase in sentiment was declining volatility and not a penchant for more risk-tolerant styles or sectors (removing the two risk metrics show a decline in sentiment last week).

Sentiment remains stuck in neutral in all major markets except China. Investors have gone from convincingly bullish in Q4, 2020 after multiple vaccine news, to fence-sitters and bet-hedgers so far in 2021.

US investor sentiment recovery stalls midway into the Neutral zone. European investor sentiment makes an attempt at regaining the bullish zone. Global and Asia ex-Japan investor sentiment recovery suffers from lack of confidence.

US markets seem in Déjà vu mode with sentiment following a similar pattern of recovery. European investor sentiment leads other regions to the top of the neutral zone. Global and Asia ex-Japan investor sentiment recovery settles in the Neutral zone.

Helped by the repeated promise of continuous stimulus from the Fed and the Biden administration, US investor sentiment began to stage a rebound from deep in bearish territory, to the edge of the neutral zone (top chart). In recent weeks, a deteriorating sentiment had capped market’s advances, but that downward pull seems to weaken last week with both ROOF ratios recovering some ground, ending just shy of the neutral zone.

US markets reached new record highs last week, but sentiment remains risk-averse. European markets seem to anticipate a stimulus-induced rebound in sentiment. Global and Asia ex-Japan investor sentiment recovers slightly to end week in neutral.

Fed Chairman Powell has reiterated his insouciance about inflationary pressures and the Biden administration is already working on its next fiscal stimulus package.

Sentiment continued to decline ending in bearish territory for all major markets except the UK. Markets seem to be responding to the recent lack of risk appetite as they did back in October 2020.

Every market we track except the UK and Australia have seen a further deterioration in sentiment. The decline in sentiment is not new, however last week, markets finally heeded the call and declined in-line with sentiment.

Markets and sentiment continue to diverge. A shift has taken place among some market participants towards the speculative model and away from the fundamental one.