Like a cool breeze on a hot day…the post-Brexit market rally has soothed investors.
The CBOE Volatility Index (VIX), also known as the fear gauge, fell significantly during the past few weeks, according to CNBC.com. The VIX measures investors’ concerns about future volatility. The lower the Index is; the calmer investors are about the future. In late June, the VIX rose as high as 25.76. Last week, it hovered around 12.
Barron’s reported the latest advisory sentiment readings from Investors Intelligence showed bullishness at 54.4 percent, up two percentage points from last week. That’s the highest reading since April 2015 (just before the S&P 500 hit its previous record).
The relative serenity of investors has been good for markets. By the middle of last week, the Dow Jones Industrial Average (Dow) and the Standard & Poor’s 500 Index (S&P 500) were at record highs. Not everyone is convinced investor positivity is a good sign, however. Barron’s explained:
“After nearly two years of sideways trading, albeit with some large swings, the indexes finally gave what should be an important buy signal. But is it really? …I am not talking about the simple divergence between price and volume during the June-July rally, although that certainly does not help the bulls. Nor am I considering the seasonal cycle, which teaches us to ‘Sell in May’ and sit out the usually weaker summer months. And I am not talking about any news from politics to Brexit to terrorism…What really bothers me is the lack of dissent in the bullish chorus.”
If this keeps up, then contrarians, investors who use popular opinion as a gauge of what not to do, may find themselves leaning toward pessimism.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
*Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* This newsletter was prepared by Peak Advisor Alliance of which DeYoe Wealth Management is a Member, and should not be construed as investment advice.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* You cannot invest directly in an index.
* Consult your financial professional before making any investment decision.
* Stock investing involves risk including loss of principal.
* “Is Sentiment Too Good?”
Sources:
http://www.cnbc.com/2016/07/19/no-fear-heres-why-the-vix-has-cratered.html http://www.cboe.com/micro/vix/historical.aspx (For June index readings choose Historical Daily Prices – Spreadsheet with Closing Prices for Several Indexes)
http://www.barrons.com/articles/as-investors-sing-a-happy-tune-smart-money-wonders-if-its-time-to-sell-stocks-1469120253
http://www.barrons.com/articles/3-reasons-to-worry-that-stock-rallys-end-is-near-1469050014
The post Is Sentiment Too Good? appeared first on Happiness Dividend Blog – Personal Finance, Education and Investment Guidance.