Aug 17, 2022
We hate to say it but the strongest argument in favour of a continuation of the current market rebound is the fact that most investors remain extremely negative. The BofA Bull & Bear indicator for example has remained at maximum bearishness levels since the beginning of the rebound. In the August survey, the cash allocations of professional investors are dropping somewhat but stay well above their long term average. In the short run, markets behaviour has to do a lot with sentiment and less with fundamentals. If being negative is the broad consensus, equity markets could well continue to edge up higher in a pain trade. This does however not change our longer term view on deteriorating economic conditions and we stay defensive.