NEW YORK, Dec 18 — Investors are scrutinizing the stock market’s narrowing breadth and other signs of ebbing risk appetite, as markets digest a hawkish pivot from the Federal Reserve, soaring inflation and concern over a fresh wave of Covid-19 cases.
Narrowing breadth can presage a period of rocky trading, with deeper-than-average drawdowns and weaker overall returns, Goldman’s data showed. The bank’s analysts said declines may be limited this time around by factors such as strong corporate earnings and a market that may have already priced in a more hawkish Fed.
The percentage of investors with a bullish short-term outlook for the US stock market slid to the lowest level in three months in the latest American Association of Individual Investors Sentiment Survey , released yesterday. “The door might not be wide enough to accommodate everybody that wants to rush out,” said Siomades, of Advisors Excel Wealth Management.
Meanwhile, a survey of global fund managers by BoFA Global Research’s showed cash allocations at their highest level since May 2020. High levels of cash have in the past been a bullish sign for stocks, the bank said.