It might be time for the chase in US stocks
New all-time highs for stocks and a swath of traders who didn’t think that would happen can be a recipe for even more records.
“The S&P 500 rallied past the February highs today,” Deutsche Bank strategist Parag Thatte wrote in a note from Friday. “However, contrary to popular perceptions, we see few signs of strong bullish sentiment and risk appetite.”
Speaking at an Odd Lots live event Thursday evening, Nomura’s managing director of cross-asset strategy, Charlie McElligott, suggested that investors who had taken chips off the table amid the momentum breakdown and tariff-induced market tumult and had been slow to add back exposure “are being forced in to the upside.”
“Equity positioning has risen significantly off the bottom but is still far below February levels and remains underweight,” Thatte added. “A basket of stocks with the highest net call volumes in the previous week has gone largely sideways over the last month but rallied this week, a good indicator in our view that risk appetite and momentum-driven buying had not been playing a significant role but are starting to pick up.”
As a lot of our coverage at Sherwood News has detailed, there are some signs of strong bullish sentiment and risk sentiment occurring outside the major indexes, like Oscar Health or smaller large-caps (Super Micro Computer, for instance).
Last week, Bank of America Chief Investment Strategist Michael Hartnett highlighted that just 22 S&P 500 stocks were at all-time highs as of June 26, when the benchmark stock gauge was on the verge of a record close, versus 67 when the gauge broke out to a fresh record high in January 2024.
“Tech back driving US equity bus and remains a narrow bull,” he wrote.
New highs and traders getting stopped into a market they hated until it became a career risk to keep fighting could see a rotation outside of the winners who’ve kept on winning, or a continued doubling down on the most successful names.
