Bloomberg : Biggest Shift in sentiment since 199929 Jul 2023 19:01
‘All the chatter back in December was that 2023 was to be the “year of the bond.” And for a brief moment or two in the winter, that call — and the economic doom-and-gloom that underpinned it — looked right.
It is now being overrun, though, by an avalanche of demand for equities that has unleashed a furious rally across the globe and, in a sign the gains are likely far from over, made investors more optimistic about stocks relative to bonds than at any point since SentimenTrader models began comparing them 24 years ago’
2023 had all the makings of a breakout year for fixed income. The end of aggressive Federal Reserve rate hikes and a pivot to easier policy should have set up a rally in bonds and made them an insurance policy against a growth downturn.
Instead, the economy seems to have pulled off a rare feat: inflation has slowed while new jobs are being created. Growth keeps accelerating and even staff at the US central bank are no longer forecasting a recession. The Fed is still raising rates — though it may have just completed its last increase this week — and bonds aren’t living up their billing as a safety valve.
The surprising reversal has found some prominent sell-side strategists issuing mea culpas, others upgrading their stock targets, and more downgrading their recession forecasts or giving them up altogether.
More than half of clients surveyed last week by JPMorgan Chase & Co. say they are now convinced the US economy can continue to expand despite rapid-fire hikes, so-called “soft” or “no landing” scenarios. The survey shows a jump in the number of investors planning to boost equity exposure at the expense of bonds.
That’s already happening. Discretionary investors — who allocate cash based on their view of the economy — have ramped up their pace of stocks buying on par with the time of the vaccine announcement in late 2020, according to Deutsche Bank AG. Flows into exchange-traded funds show a strong preference for equities over fixed income in the last three months, a big reversal from the start of the year.
“The bears were loud all year and still are and meanwhile the market climbed the wall of worry perfectly the entire time,” said Ken Mahoney, chief executive officer of Mahoney Asset Management. “We definitely can understand their point of view. But they are missing out on the technicals that have been telling us stocks are working their way higher.”
https://www.bloomberg.com/news/articles/2023-07-29/stocks-crush-year-of-bond-in-biggest-market-sentiment-shift-since-99
Sign In
Follow the stocks
