The recent rise in sentiment that began in early September (excluding China) paused last week as investors tensely awaited the outcomes of the US Presidential election and the meeting of China’s Standing Committee. The previous week’s bullish mood among investors in Asia ex-Japan, Australia, Global Developed markets, Global Emerging markets, and the UK turned neutral ahead of these events, recognizing the binary nature of these potential outcomes. The US Election: Last week, the markets were weighed by anxiety about the US election, largely due to predictions of a very tight race by pollsters – the same ones who forecasted “Remain” and “Clinton” back in 2016. The combination of a deeply divided electorate, sharply contrasting visions from the candidates on America’s future, and the expecta

Investor sentiment saw a boost last week, with six out of the ten markets we track (Asia ex-Japan, Australia, Global Developed, Global Developed ex-US, Global Emerging, and the UK) closing the week on a bullish note. Japan’s sentiment was also positively influenced by a weakening Yen, nearly reaching bullish levels. In Europe, investors briefly turned bullish but ended the week with a neutral outlook. Meanwhile, sentiment in the US and China remained cautious due to upcoming significant events in these markets: the US elections and China’s Standing Committee meeting. Why are global investors so convinced (bullish) of a good outcome when local investors (US and China) are themselves unsure? The US Election: Investors globally have been increasingly positioning their portfolios for a Trump v

The reporting season and the US election will determine the markets. Major losses on the markets are not expected, but greater fluctuations. 28 October, 2024 FRANKFURT (Frankfurt Stock Exchange). Just over a week to go until the US election - but while the uncertainty on the bond markets is reflected in higher yields, the mood on the stock market remains positive. Although the DAX, S&P 500 and Dow Jones have not been able to continue their record run of late, they are not far below their all-time highs. On Monday morning, the DAX stood at 19,492 points after closing at 19,464 on Friday and reaching an all-time high of 19,674.70. The reporting season reaches a peak this week. In the USA, more than a third of the S&P 500 companies publish their figures, including Alphabet, Microsoft,

The improving macroeconomic environment, marked by lower inflation, reduced interest rates, and the absence of a recession across major economies, continues to support sentiment. Investors in Global Developed Markets are becoming bullish, while those in Global Emerging Markets and Asia ex-Japan are turning positive. However, sentiment in Japan, China, and the US remains affected by the uncertainty of their local political situations, including elections in Japan and the US, and the size of an eventual stimulus in China. Meanwhile UK investors remain bullish about their prospects. Japan: Investor sentiment in Japan declined from bullish to positive last week, ahead of the weekend’s general elections. The ruling LDP party’s newly elected leader and Prime Minister’s gamble backfired, with the

Investor sentiment ended the week bullish in Australia, Japan, and the UK, driven by rising gold prices, a weakening Yen, and decreasing inflation, respectively. In contrast, sentiment in China has turned negative following disappointing macroeconomic data last week. In the US, stronger-than-expected earnings have temporarily halted the decline in investor sentiment, preventing it from becoming bearish, but it remains in negative territory at the week’s end. Elsewhere, Asia ex-Japan, Global Developed and Emerging Markets, and Europe, sentiment remained neutral, possibly in a holding pattern for the rest of the year. This month, the Chinese authorities have shifted from trying to support the stock market ‘passive-aggressively’ to outright ‘aggressive-aggressively’. Unfortunately, their subs

Investor sentiment improved in Asia ex-Japan from bearish to negative, in Japan from neutral to positive, and in Australia and the UK from positive to bullish. Elsewhere, sentiment remained neutral except in the US, where it stayed negative. China: Sentiment in China continues to be driven by the policy response to the country’s declining growth prospects. Last Wednesday’s disastrous press conference by China’s main economic planning agency sent the wrong signal to investors, who responded by selling off recently purchased stocks. Saturday’s press conference by the Ministry of Finance was also long on promises but short on specifics, doing little to assuage investors’ angst. In late August, investors thought the authorities had  discovered that the economy had fundamental problems. It

Investor sentiment weakened slightly across Asia but remained mostly unchanged in Europe and the US, where investors stayed neutral ahead of the Q3 earnings season and the upcoming US elections in less than a month. China was closed for a week-long national holiday and will reopen on Tuesday. In China, the speculative rally driven by cash injections, margin calls, and share buy-backs is likely to resume in the short-term. However, investors will be closely watching this week’s press conference by China’s top economic planning agency for details on the multiple stimuli announced ten days ago. Simply injecting new money into old problems won’t change China’s negative economic fundamentals. Investors will need to see a political commitment to realigning economic resources and a credible rescu

Last week, investor sentiment remained steady, balancing positive developments from China and encouraging inflation news from the US and Europe against deteriorating situations in Ukraine and the Middle East. Chinese authorities have finally detailed their stimulus package, but it seems to be addressing the wrong problem - feeding a non-hunting bear instead of a starving wolf. This suggests that further measures will be needed soon. Japan has a new Prime Minister (candidate) which should maintain the status quo with the US and China. And in the US and Europe, investors appear to have shrugged off the positive inflation news, shifting their focus to unemployment and overall economic health. As a result, a miss on this Friday’s Jobs report is expected to have a greater impact than previous o

Investor sentiment remained stable last week, with notable exceptions in Asia ex-Japan and Europe, where the outlook shifted slightly from bearish to negative. In Global Emerging Markets, sentiment improved from negative to neutral, while in Japan, the weakening Yen contributed to a positive mood among investors. Chinese investors have once again become hopeful on talks of yet another stimulus package. However, the disparity between potential supply and demand for risk continues to be quite negative in Global Developed Markets, Global Developed ex-US Markets, and Europe, making these markets susceptible to overreactions in case of any negative developments. Over the past two weeks, the Fed, ECB, BoE, and BoJ all made interest rate decisions that aligned with investors’ expectations, helpin

This week, investors’ mood remained largely stable, with a bearish outlook persisting in Asia excluding Japan, Global Developed excluding the US, and Global Emerging markets. Sentiment stayed negative in Global Developed markets and Europe, while Japan and the US maintained their neutral stance. The recently positive mood in China endured another week, while investors in Australia recovered their bullish feeling last seen in July. The large dispersion in investor sentiment across the world reflects the prevailing uncertainty, fueled by inconsistent economic indicators and a packed schedule of forthcoming events. These include crucial interest rate decisions from the ECB and the Fed, set to take place this month, amidst ongoing geopolitical tensions in Gaza and Ukraine, and a too-close-to-c

Investor confidence is on the rebound in the US and Japan, as market sentiment shifts from bearish to a more neutral stance. This positive change has also nudged the sentiment for Global Developed markets up a notch, improving from bearish to negative. However, investors still hold a bearish view in Global Developed ex-US Markets, Global Emerging Markets, and Asia excluding Japan. Meanwhile, sentiment in Australia, China, Europe, and the UK remained neutral, unchanged from the previous week. August began with a proverbial warning from the land of the rising sun about crowding risk in the carry trade, and reminding us that investors who panic together, sell together. However, sentiment ended the month on a more optimistic note, defying its bearish start. Despite elevated levels of both vola

Investor sentiment remained largely unchanged last week across most markets, with a few exceptions. In the US, assurances of a rate cut at the September FOMC meeting on Friday slightly improved sentiment, shifting it from bearish to negative. In the UK, sentiment saw a modest improvement, moving from negative to neutral. In other regions, sentiment remained bearish, including in Asia ex-Japan, Global Developed, Global Developed ex-US, and Global Emerging Markets. In Japan, investors wavered between being bearish and very negative. European sentiment ended the week as very negative but not quite bearish, while sentiment in Australia stayed positive, and Chinese investors remained neutral. As we observed at the beginning of August, a negative surprise can quickly push a confident market to t

Investor sentiment remains weak across global markets, ending the week bearish in five out of the ten markets we track and negative in three others. While sentiment has bottomed out in some regions (including Global Developed Markets, Global Developed ex-US Markets, Europe, Japan, the UK, and the US), it continues to deteriorate in others (such as Asia ex-Japan and Global Emerging Markets). Sentiment held steady only in China and Australia, where investors stayed neutral and positive, respectively. The current negative supply-demand imbalance for risk in several markets, as indicated in the Risk Tolerance and Risk Aversion charts below, makes them susceptible to sharp downside moves, particularly in response to any negative interpretations of upcoming Fed speeches or hints of delays in coo

Markets may have started to recover from last week’s fall, but investor sentiment remains on a downtrend. Sentiment had ended the previous week bearish in four markets, bullish in only one. Last week, amidst the attempted rebound from markets, investors’ mood worsened still, ending bearish in seven markets, bullish in none. Only Australians are holding on to a positive mood for now. Investors who only three weeks ago were bullish in both the UK and China, now seem to have given up hopes, ending very negative in the former and neutral in the latter. What Happened: The world, which had been increasingly predictable until July 20th, quickly became unpredictable after July 21st. On July 20th, return forecasts were based on a victory for Donald Trump in November, a soft landing for the U.S. eco