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.
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