The fear on Wall Street is fading, as stocks continue their unprecedented Bull run in the midst of the global coronavirus chaos.
The Cboe Volatility Index (VIX), or “fear gauge,” is near its lowest mark since late February and options markets are showing diminishing concerns of a near-term fall in US equities.
The S&P 500’s run to fresh highs has come as some of Wall Street’s biggest banks, including Goldman Sachs (NYSE:GS), UBS Global Wealth Management (NYSE:UBS) and Morgan Stanley (NYSE:MS), turn more Bullish stocks and are urging clients to remain and get further exposed to equities. The index ended at a record high Tuesday, confirming a Bull market, according to the Key definition.
Investors may well heed their advice: nearly 80% of money managers surveyed by BofA Global Research, the highest mark in more than 10 yrs, expect the global economy to grow over the next year. The survey also showed falling allocations to cash, another sign of increasing Bullishness.
The growing optimism is in contrast to the fear, doom and gloom that prevailed on Wall Street just a few months ago, after the S&P 500 plunged 34% in just 23 trading days and the economy entered an immediate recession that turned out to be its worst since the Great Depression.
Although financial pain is still acute for many Americans, monetary support from the Fed and expectations for advances in fighting the coronavirus chaos have made investors more confident in betting on the future, and hence the Key reversal on 23 March.
We have a stock market that sees that we are getting closer and closer to a more ‘normal’ world.
Options markets reflect fading investor worries and concerns. Demand for protection (insurance) against declines in US equities of 30% or more has fallen as volatility has faded in recent months.
Meanwhile, selling of protective Puts in individual stocks is up over the past week. Put sellers profit if the underlying stock does not drop to a specified level in a specific frame. Put selling suggests investors are less worried about the Southside.
In futures markets, net long equity positioning is now at its highest mark since early March, with increases in both large-cap and small-cap stocks, Deutsche Bank’s data shows.
The increasingly Bullish positioning dovetails with the messages coming from big Wall Street banks.
Goldman Sachs (NYSE:GS) raised its year-end target for the S&P 500 early this wk to 3,600 from 3,000, citing expectations for outsized growth in US corporate earnings and GDP next year.
Thursday, the major US stock market indexes finished at: DJIA +46.85 at 27739.73, NAS Comp +118.49 at 11265.03, S&P 500 +10.66 at 3385.51
Volume: Trade on the NYSE came in light at 707-M/shares exchanged
HeffX-LTN’s overall technical analysis of the US major stock market indexes is Bullish with a Very Bullish bias in here.
- NAS Comp +26.6% YTD
- S&P 500 +4.8% YTD
- DJIA -2.8% YTD
- Russell 2000 -6.2% YTD
Looking Ahead: Investors will receive Existing Home Sales for July Friday
Have a healthy day, Keep the Faith!