Investors have been euphoric following the November election and vaccine announcements from Pfizer and Moderna.
"I think we're already at extremes in sentiment," she told Business Insider by phone on December 17. More specific to the moment, investors should be wary of atmospheric sentiment levels because the breadth of the market's recovery, which was strong following November's vaccine news, has started to deteriorate."Where you tend to get a bigger problem is if sentiment is really, really elevated, and then you start to see a brisk deterioration in the market but sentiment just stays optimistic," Sonders said. "That to some degree is what happened in the early part of 2000.
She laid out the striking similarity seen between the two years. In March 2009, for example, the market bottomed in anticipation of an economic recovery, like has happened this year. However, any pullbacks are likely to happen in concentrated areas of the market where sentiment is highest at the time, she added.While sentiment is overwhelmingly positive, however, it can't itself lead to a sell-off, Sonders said.
"The risk that would come potentially with that is if we really see a surge in growth and it's accompanied by a pick up in inflation beyond what we've seen recently or what's expected, does that put the Fed in a pickle?" she said.
this is terrible news