ROOF Highlights

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.

For the past few weeks, markets have been ignoring sentiment’s gradual pull-back and rallied, confident in their belief that neither central banks’ easy credit nor their massive asset purchasing programs will come to an end any time soon.

The week ended mixed with most markets showing a divergent mood between our Style and Sector ROOF Ratios.

Investor sentiment in the US, global developed markets, and Asia has been trying to convince markets they were wrong to keep rising, and that the premiums being paid for risk assets ran counter to investors’ deteriorating risk appetite.

The absence of clear economic and immunization success stories globally, has turned investors into hypochondriacs, debating who’s feeling bullish and who’s not and who’s not now but was a few weeks ago or isn’t bearish yet but thinks they might be soon, etc..