June 13, 2023
Investor sentiment hasn’t been this bullish since late 2021/early 2022, according to two closely watched market sentiment indicators.
The latest weekly survey by the American Association of Individual Investors (AAII) found the proportion of investors who are bullish versus those who are bearish has surged to 20%, its highest since November 11, 2021, when the bear market in equities began.
Corroborating those results is the popular Ned Davis Crowd Sentiment indicator, showing its highest bullish bias since March 31, 2022.
Driving the optimists is the growing market narrative that the U.S. economy will experience a soft landing. A sense that the Fed is winding down its rate-hiking cycle is also boosting the mood, along with the absence (at least so far) of a substantial credit crunch arising from regional bank problems.
With the Fed likely to keep rates higher for longer, we still think there’s a possibility of a mild recession, but one that is more likely in 2024.
The coming third and fourth quarters would have to register negative GDP growth for the U.S. to suffer a technical recession this year. We think that’s unlikely, given how resilient the economy is today.
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