Investor sentiment across global developed markets, the US, Europe and Japan weakened further last week, falling into or near the bearish zone (although Japan did recover somewhat in the last two days). In contrast, investor sentiment across global emerging markets, Asia ex-Japan and China strengthened further, rising to the upper region of the neutral zone.
Investor sentiment weakened further last week in all markets we track. The global decline in sentiment is weighing on markets and preventing a sustainable rebound from the corrections experienced in September.
Investor sentiment has returned to the neutral zone, but continues to reflect an uneasy feeling about proclamations exhorting the post-pandemic’s positive impact on the economy while ignoring the continued spread of increasingly more virulent variants.
Sentiment in five of the seven markets we track has fallen into the bearish zone, and were it not for a decline in volatility, the US market would also show a bearish mood. Only Japan seems to not have gotten the memo and is bucking the trend with cautious optimism.
Investor sentiment continues to tread at the bottom of the neutral zone across all markets we track. Persistent uncertainty about the strength of economic growth is weighing on investors’ risk appetite and pushing sentiment closer to the bearish zone.
Investor sentiment remains in indecision land across all markets we track. And if you are a regular reader of these highlights (we’ll go with that assumption for now), then you’ll know that sentiment, globally, has been stuck between slightly negative and slightly positive for the past four weeks.
Investors remain trapped at the intersection of rising inflation and slowing economic growth – two worries that when combined at their extreme, makes them think of stagflation. And while no-one is using the s-word yet, this lack of clarity continues to negatively affect the collective unconscious.
Investor sentiment declined from recent highs in all major regions last week, with investors in Developed Europe curbing the recent surge in enthusiasm and rejoining others in the ambivalence of neutral zone.
Sentiment among US, European and global developed-market investors remained neutral, moving in a tight range from the previous week, while Asia ex-Japan investors pared their bullish sentiment to a somewhat less overly optimistic mood.
For the past few weeks, declining volatility has been the main driver of improvement in sentiment. With volatility now back to pre-pandemic levels in most markets we track, there does not seem much downside potential from here, especially with the seasonally more emotional summer months ahead.