2017 saw USD 299bn inflows into equity funds, the second highest year on record. Remarkably, the index has risen more than 30 percentage points since its low-reading of 29.5% at the end of November, just seven weeks ago. In the more than 30 years – just under 1600 weeks – since the index started, it has seen fewer than 50 weeks with higher readings. Bullish investors now make up just shy of 60% of those surveyed, well above the historical average of 30%. US 401k plans are more invested in equities than ever before and on January 4th, the AAII (American Association of Individual Investors) sentiment survey jumped to its highest level in 7 years. small business sentiment just rose to its highest level since the index was founded in 1975. On the back of Trump’s raft of deregulation and tax cuts, the NFIB (National Federation of Independent Business) survey of U.S.
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There’s positive economic news wherever you care to look for it and both CEOs and investors appear to be embracing the wave of optimism. This means that the current period of stability has overtaken 1965, and only once since 1920-1995 has the market enjoyed a longer run without a 5% fall. 2018’s first week was up 2.77%.Īnother data point that adds to the sense of remarkable bullishness surrounding the dawn of 2018: as of the 11th of January, 387 days have passed since the last 5% drawdown in the S&P 500.
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The average return for a year that opens up more than 2% is 19%. Of the sixteen years in which the market has opened up more than 2%, there have been no down years and only two years in which the index returned less than double digits.
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While we’re not sure that there’s anything profoundly meaningful in the analysis, we looked back at every year since 1950, and noted an extraordinarily high correlation between a strong opening week and overall performance for the year. The S&P 500 has just enjoyed its best opening week of the year since 2006. CIO Pierre-Henri Flamand explains why the current equity environment accords strongly with the ‘fifth wave’ of Ralph Elliot’s wave model of behavioural finance.