Stock markets are yet to see full capitulation, Sanford C. Bernstein strategists said, taking a contrary view to that of Bank of America Corp., whose survey showed that investors have already thrown in the towel.
“We still haven’t seen the classic signs of capitulation yet on Wall Street, but the stock market appears to be turning a corner, for now,” Sarhan said in a phone interview. “Do we have the classic signs of capitulations? No. The VIX and equity put call ratios are no where near extreme levels. We still haven’t seen tremendous amounts of fear on Main Street, but in the short term the stock market is set up for a bounce.
Bernstein strategists said that global equity fund flows have “remained remarkably resilient this year” and that most of the inflows occurred during the first quarter, followed by only minor selling of US$8 billion in the second quarter even as markets were rocked by the highest inflation in decades and rising risks of economic stagnation.
“Without Fed support from the corner, selling pressure has been severe and finally reached the washed-out level readings we have been watching for,” Craig Johnson, chief market technician at Piper Sandler, and Adam Turnquist, vice president and equity research analyst at the firm, wrote in a note to clients.
Bank of America strategists said their custom bull & bear indicator remains “max bearish,” which could be a contrarian signal for a short-term rally in stocks and credit in coming weeks. But Wells Fargo’s McMillion pointed to the aftermath of the 2008 crisis when investor sentiment had also hit a low, but it took months for the stock market recovery to gain traction.
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