Wall Street’s major indexes remained relatively flat on Wednesday, experiencing volatile trading as investors reassessed their positions in non-technology sectors ahead of a forthcoming U.S. inflation report. This Friday’s personal consumption expenditure report is significant for investors. According to LSEG’s interest rate probabilities, investors currently see a 62% chance of a 25-basis point rate cut in September, and about two cuts by the year-end.
The American Association of Individual Investors (AAII) produces a weekly survey of stock market sentiment among its members and according to the latest survey, the outlook remains positive. Investors Intelligence (II), a global investment service, also publishes a weekly sentiment survey which is also closely monitored, and, at extremes, may be useful as a contrarian measure of sentiment.
According to the latest data from Investors Intelligence (II), 61.5% of investment advisors are bullish, marking the highest reading since March 27, 2024, when it reached 62.5%. Investors Intelligence also reported that 18.5% of advisors are bearish, while 20% call for a correction. The bull-bear spread is at 43.0% and it is important to say that the spread’s 2024 high was at 48.4% on March 27.
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S&P 500 Index Current Situation
Specific periods when the bull-bear spread plunged into negative territory, such as December 2018 and March 2020, did a very good job of signaling extreme bearishness that occurred around major market lows. Currently, the S&P 500, at approximately 5,470, is just below its record intraday high of 5,505.53 and traders are closely watching the bull-bear spread in case it continues to worsen.
Ryan Detrick, chief market strategist at the Carson Group said that positive second-quarter earnings and benign inflation data could encourage more rotation from tech to sectors that have lagged this year and he does not expect that “bears” will take control of the market movement. BofA Securities equity and quant strategist Jill Carey Hall noted last week that while BofA’s private clients continued buying equities, hedge funds and institutional clients were selling. This behavior might indicate profit-taking rather than an anticipation of a market correction.
Regarding the 11 GICS sectors, Hall reports that clients mainly purchased stocks in seven of the major groups, with the largest inflows going into tech and communication services for the third consecutive week. Notably, communication services have experienced the longest buying streak at 12 weeks. Conversely, financials saw the largest outflows for the second consecutive week.
