Skip to Content

Share this post

Wall Street’s confidence stirred but not completely shaken

10 April 2018

Bob Cunneen, Senior Economist and Portfolio Specialist, NAB Asset Management


US shares vs Sentix investor confidence

Sources: Federal Reserve, St Louis and Datastream

 

America’s share market made record highs in January 2018. The S&P 500 Index peaked at 2872.87 on January 26 (black line). Large corporate tax cuts and strong profit results in the first year of the Trump Presidency provided the fundamental fuel for Wall Street’s gains.

This US share market surge was also driven by rising investor confidence. The Sentix confidence survey shows that investors have been increasingly exuberant since 2016 (red line). At some point, this exuberance had to end in overconfidence. A combination of higher US interest rates and concerns over a potential trade war between the US and China has seen Wall Street beat a retreat with a -9% fall in the S&P 500 Index since January.

Yet investor confidence has only made a modest fall this year with the Sentix falling from January 32.8 to April 19.8. So investor confidence has been stirred but is not completely shaken. However this resilience in confidence could be tested further if the US-China trade war intensifies and the US central bank moves to aggressively raise interest rate over coming months.

 

Important Information

This communication is provided by MLC Investments Limited (ABN 30 002 641 661, AFSL 230705) (“MLC”), a member of the National Australia Bank Limited (ABN 12 004 044 937, AFSL 230686) group of companies (“NAB Group”), 105–153 Miller Street, North Sydney 2060. An investment with MLC does not represent a deposit or liability of, and is not guaranteed by, the NAB Group. The information in this communication may constitute general advice. It has been prepared without taking account of individual objectives, financial situation or needs and because of that you should, before acting on the advice, consider the appropriateness of the advice having regard to your personal objectives, financial situation and needs. MLC believes that the information contained in this communication is correct and that any estimates, opinions, conclusions or recommendations are reasonably held or made as at the time of compilation. However, no warranty is made as to the accuracy or reliability of this information (which may change without notice). MLC relies on third parties to provide certain information and is not responsible for its accuracy, nor is MLC liable for any loss arising from a person relying on information provided by third parties. Past performance is not a reliable indicator of future performance. This information is directed to and prepared for Australian residents only. MLC may use the services of NAB Group companies where it makes good business sense to do so and will benefit customers. Amounts paid for these services are always negotiated on an arm’s length basis.