The latest weekly equity (and bonds) sentiment poll I take on Twitter has produced some interesting results this week. I have done this poll each week for about a year now, and have collected the results in an excel sheet and thus am able to produce some charts and insights based on the emerging historical patterns and trends. This week there’s a couple of things I wanted to point out. First is the YTD high in net-bullish fundamental sentiment – which stands in contrast to the fairly weak reading in technicals driven sentiment [the survey differentiates between technical and fundamental driven/rationale sentiment].
Technicals sentiment appears to work better as a contrarian indicator, and fundamentals seems to work with a slight lead. Where this gets interesting is when you compare overall net-bulls for equities vs bonds. The rebound in equity sentiment has been mirrored in more bearish bond market sentiment - and then some. In fact one interpretation could be that the bond market sentiment is flagging even better conditions to come for the equity market. Of course it could just be another sign that Taper 2.0 is about to cause Taper Tantrum 2.0! This would represent a temporary setback for equities, but better macro conditions i.e. better growth and inflation (bearish for bonds) would be bullish for equities.
Fundamentals driven net-bullish sentiment is at it's best reading so far YTD - at the same time technicals sentiment has just bounced of extreme lows. This presents an interesting setup.
Important note: the bond net-bullish sentiment line is on the second axis and is inverted i.e. represents bearish sentiment on bonds. Typically the macro environment that is bearish for bonds is usually bullish for equities so I find this chart to be compelling.
For institutional grade insights on the global economics and asset allocation, and some more good charts you may want to subscribe to the Weekly Macro Themes. Click through for a free trial.