Talking Points:
- While many benchmarks of 'risk appetite' may still be well off their recent record highs, the S&P 500's is at hand
- A four-month climb in sentiment is starting to struggle as participants assess their conviction
- Economic forecasts, market yields and participation offer little foot hold for sustained investment
Having trouble trading in the FX markets? This may be why.
While the S&P 500 (and US equities) is somewhat unique amongst the high profile, risk-oriented benchmarks for its proximity to record highs; the sense that sentiment is stretched spans the financial system. The rebound in assets that perform in high growth and high-return-seeking conditions over the past four months was certainly broad and robust. However, it never acquired the full weight of conviction on a fundamantal or even a speculative basis basis.
An improved economic backdrop for higher or more stable returns is undermined by the constant warning of current lackluster growth and further struggle head. The OECD reiterated those sentiments just this past session remarking that its 3 percent global expansion forecast was 'dismal'. For meaningful rates of return to compensate for higher risk, market-based rates have been gutted by the accommodative monetary policies aimed at spurring growth.
From the speculative perspective, the low-hanging fruit of the past weeks and months looks to have been picked. Critical technical boundaries are coming into view, momentum is slowing for the short-term holders and event risk that could offer short-term volatility support is thinning out. The risk influence is still strong with remarkable correlation across assets, but conviction is starting to suggest a big shift. What should we look for and how should we prepare? That is the focus in today's Strategy Video.
To receive John’s analysis directly via email, please SIGN UP HERE
