Investors are losing their ability to resist a stock rally that much of Wall Street is convinced is doomed.
More than $12.6 billion has been sent to equity exchange-traded funds in April, the largest influx since January and more than twice the rate of February and March. Money is pouring into stocks as fast as it’s being yanked out of cash: ultra-short duration ETFs are on track for their first monthly outflow since January, data compiled by Bloomberg show.
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Spigots are turning back on at a time of fairly intense skepticism among the pundit class. To the ever-elongating list of potential obstacles, investors were treated in the last few days to dour tidings in both the Federal Reserve Beige Book report and the Philadelphia Fed’s manufacturing index.
While earnings have been broadly positive, results from Fastenal Co. to Ally Financial Inc. and even Tesla Inc. hinted the US consumer is beginning to buckle. Meanwhile, the S&P 500 is butting up against a level where previous attempts to break out of its sideways march have run out of steam.
Does a case for optimism exist? Yes, mainly in how widespread the bearishness remains — by some measures, it’s the most extreme since 2009. Despite the souring risk appetite after aggressive Fed tightening and banking system turmoil, the S&P 500 has still come nowhere near revisiting its worst levels of last year.
“We haven’t had a new low since October, people aren’t hearing artillery shells landing anymore, so they’re peeking heads out of foxholes,” said George Pearkes, global macro strategist at Bespoke Investment Group. “It may seem silly to attribute large flows of capital to something as simple as not seeing a drop in some time. But that’s how we see flows and sentiment operating in practice, even if it is simple and reductive.”
The S&P 500 finished the week a hair lower, leaving this year’s gain above 7.5%. Meanwhile, volatility continued to drain from the bond market — the 10-year Treasury yield added just four basis points in the week, the smallest swing since before Silicon Valley Bank’s sudden collapse last month.
Read the full article here by Katie Greifeld, Vildana Hajric, Advisor Perspectives.
