The S&P 500 rallied past its February highs. But Deutsche Bank strategist Parag Thatte sees few signs of strong bullish sentiment and risk appetite. “Contrary to popular perceptions, we see few signs of strong bullish sentiment,” wrote Thatte in a note on Friday.
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Nomura’s managing director of cross-asset strategy, Charlie McElligott, suggested investors who reduced their market exposure amidst the momentum breakdown and tariff-induced turmoil are now being forced to buy back in. “Equity positioning has risen significantly but is still far below February levels and remains underweight,” he added. “A basket of stocks with the highest net call volumes in the previous week has gone largely sideways over the last month but rallied this week,” a good indicator, in Thatte’s view, that risk appetite and momentum-driven buying are starting to pick up.
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Bank of America’s Chief Investment Strategist Michael Hartnett recently emphasized a key detail: just 22 S&P 500 stocks were at all-time highs as of June 26, compared to 67 when the gauge hit a fresh record high in January 2024. “Tech is back driving the US equity bus and remains a narrow bull,” he wrote.
Cautious optimism despite market gains
A solid June nonfarm payrolls report helped US stocks end the holiday-shortened week on a strong note. The S&P 500 rose by 0.8%, while the Nasdaq 100 and Russell 2000 gained 1%.
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Tech was the best-performing S&P sector, led by standouts such as Cadence Design Systems and Synopsys, despite consumer staples and materials ending slightly in the red.
Datadog jumped on its inclusion in the S&P 500. Semiconductor-adjacent companies also surged after the Commerce Department reversed restrictions on doing business in China. Cadence Design Systems and Synopsys saw gains as the department indicated they no longer needed licenses to conduct business in China.
A Bank of America Global Research report noted that Apple’s App Store revenue grew by 11.5% in its fiscal third quarter, despite a ruling related to the Epic Games case. Analyst Wamsi Mohan observed that the concern over this ruling seems to be moot, reflecting Apple’s continued strong performance. The market sentiment appears to be cautiously optimistic as traders reassess their positions amid the latest developments.