Investor Optimism At Highest Level In 20 Years

INVESTOR OPTIMISM AT 20 YEAR HIGHS

Investor optimism, and stock markets, began to soar in late October on expectations of a Biden administration and was further fueled by news of the imminent arrival of several effective vaccines for the Coronavirus. Stock market strength was further aided by a strong tailwind provided by Fed policy and positive seasonal influences.

Investor optimism, and hence complacency, has been a characteristic of markets for the past few years.

Various measures of sentiment, including the chart of the S&P short interest, suggest that investor optimism is the highest since the collapse of the internet bubble. There has never been a larger divergence between investor expectations and the underlying economy in history.

Is consensus opinion correct in expecting much higher markets? Or are we due for a sharp correction?

We examine prospects for U.S. stock markets in our recently published December 6th issue, along with our usual updates on global markets, bonds, and key commodities.

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