Skip to Content

Share this post


29 April 2019

Bob Cunneen, Senior Economist and Portfolio Specialist

US Shares vs Sentiment

Source: Federal Reserve Bank of St Louis and Reuters Datastream.

Wall Street is within sight of the summit again. The benchmark S&P 500 Index (blue line) is approaching the record high of 2930.75 set in September 2018.  This extraordinary revival follows a dismal performance in the final quarter of 2018 when the US share market fell by nearly 14%.

A range of positive factors  has provided the new oxygen supply for this rapid ascent in 2019.   The US central bank has declared that interest rates are on hold given ‘muted inflation pressures’. There appears to be progress in the US – China trade negotiations. The Chinese economy even shows signs of stabilisation after concerns that economic activity was slowing and credit conditions were tight.  Even the Brexit debacle has been delayed with Britain getting another time extension on their exit from the European Union.

Investor sentiment has also calmed down over the past six months.  Investor surveys and market positioning measures shows optimism on US shares.  However sentiment is not as elevated as the previous peak in September 2018. Yet caution is still warranted. This sentiment gauge* (red line) remains at the equivalent high levels to the previous share market peaks in 2000 and 2007. As all mountain climbers know, the higher the altitude means the thinner the air. So the next few steps higher for the US share market will need to be taken more carefully and more slowly. 


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.