The latest results from the weekly surveys on Twitter showed some very interesting trends in investor sentiment towards both the bond market and the stock market. Below we look at some key charts from the survey as well as some data on fund flows and futures positioning and we discuss the possibility of another stock + bond selloff. If we get a repeat of the stock + bond selloff that we saw in Jan/Feb, it could well take investors by surprise, and our data show that it's equity traders who stand to bear the most pain if this happens.
The key takeaways from the stock + bond sentiment snapshot are:
-Equity investors remain bullish on the fundamentals, yet remain cautious on the technicals.
-While equity investors seem at odds with bond investors on the fundamentals outlook, it appears bond investors overall are more bearish on the outlook for bonds.
-With fund flows rolling over for both bonds and stocks it highlights the possibility of a stock + bond selloff.
-Speculative futures positioning shows bond traders are set to profit from higher bond yields, and equity traders are anticipating higher stock prices.
1. Fundamental vs Technical Sentiment:
2. Stocks vs Bonds Fundamental Sentiment: Looking at the chart of smoothed fundamentals sentiment for bonds and stocks, there's the continued divergence between the two, albeit there is an interesting early sign that bonds could be the one to close the gap. Indeed, if investors redouble their bearishness on bonds due to the fundamental picture it could be the thing that drives yields towards my 3.5% target.
