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In recent weeks, both retail and professional investors have shown increased bullishness in the market. With allocations to stocks on the rise and allocations to bonds declining, it’s clear that investors are getting excited about the current investing landscape. And they have good reason to be optimistic.
One key factor driving this exuberance is the prevailing belief in a soft landing for the economy. According to the October Bank of America Global Fund Manager Survey, a staggering 90% of fund managers expect either a “soft landing” or no landing at all, indicating confidence in the strength of the economy. This optimism is further bolstered by the Federal Reserve’s decision to cut rates, a move that is rare when the economy is in a phase of growth, as it is now.
Corporate buybacks have also played a significant role in driving the rally this year. With U.S. corporations themselves being the largest buyer of the U.S. equities market in 2024, we are seeing record levels of announced buybacks. The execution of these buybacks typically peaks in November and December, making these months the strongest period of the year for buybacks.
As we enter the traditionally strong season for stocks, characterized by rises in the last week of October through November and December, investors are keeping a close eye on the upcoming election. Historically, volatility tends to decline after an election, with stocks performing better in election years compared to non-election years.
However, despite the optimism in the market, it’s important to be mindful of sentiment indicators. The American Association of Individual Investors sentiment survey shows that bullishness is near its highest levels all year, signaling a potential shift towards frothy territory. Additionally, several sectors and a significant portion of the S & P 500 are currently overbought, which could indicate challenges in sustaining immediate advancement.
As we navigate through the market’s evolving landscape, staying informed and cautious of potential risks is key. At Extreme Investor Network, we provide you with in-depth analysis and expert perspectives to help you make informed decisions in your trading journey. Stay tuned for more unique insights and valuable information to enhance your trading experience.