Investors are losing their ability to resist a stock rally that much of Wall Street is convinced is doomed.
More than $12.6 billion has been sent to equity exchange-traded funds (ETFs) in April, the largest influx since January and more than twice the rate of February and March.
Money is pouring into stocks as fast as it’s being yanked out of cash: ultra-short duration ETFs are on track for their first monthly outflow since January, data compiled by Bloomberg shows.
Spigots are turning back on at a time of fairly intense scepticism among the pundit class. To the ever-elongating list of potential obstacles, investors were treated in the past few days to dour tidings in both the Federal Reserve Beige Book report and the Philadelphia Fed’s manufacturing index.
While earnings have been broadly positive, results from Fastenal to Ally Financial and even Tesla hinted the US consumer is beginning to buckle. Meanwhile, the S&P 500 is butting up against a level where previous attempts to break out of its sideways march have run out of steam.
Does a case for optimism exist? Yes, mainly in how widespread the bearishness remains — by some measures, it’s the most extreme since 2009. Despite the souring risk appetite after aggressive Fed tightening and banking system turmoil, the S&P 500 has still come nowhere near revisiting its worst levels of last year.
“We haven’t had a new low since October, people aren’t hearing artillery shells landing any more, so they’re peeking heads out of foxholes,” said George Pearkes, global macro strategist at Bespoke Investment Group.
“It may seem silly to attribute large flows of capital to something as simple as not seeing a drop in some time. But that’s how we see flows and sentiment operating in practice, even if it is simple and reductive.”
The S&P 500 finished the week a hair lower, leaving this year’s gain above 7.5 per cent. Meanwhile, volatility continued to drain from the bond market — the 10-year Treasury yield added just four basis points in the week, the smallest swing since before Silicon Valley Bank’s sudden collapse last month.
A similar dynamic prevailed in credit, where few signs of surface-level stress exist despite some red flags. Both investment-grade and high-yield spreads remain well below the peaks of last summer, even as ratings agencies downgrade corporate bonds to junk status at the busiest pace since the pandemic’s outbreak in 2020.
“There’s a fear of missing out on an upside move,” said Charles Campbell, a managing director and trading desk specialist at Roth MKM.
“People are also putting money in it because some believe we can have a no landing or soft economic landing scenario, which I don’t subscribe to.”
For the stock faithful, lines on charts may pose the nearest threat to hopes the rally can continue. Up four of the last six weeks to just over 4,130, the S&P 500 sits within about a hundred points of levels where rallies reversed themselves in February, November and September. At more than 18 times annual earnings, the index isn’t cheap, particularly with analysts expecting profits to fall in 2023.
While economic data remains mixed, concern over the prospect of a credit crunch spurred by March’s banking stress is proving hard to shake.
The Fed’s Beige Book survey of regional business contacts found economic activity little changed and said several districts noted banks tightened lending standards amid increased uncertainty and concerns about liquidity.
The Philly Fed factory index fell to minus 31.3, a level that has preceded past recessions.
“We still see a weakening environment for risk assets and would be playing defence,” Sameer Samana, Wells Fargo Investment Institute’s senior global market strategist, who expects the Fed to stick to its inflation-fighting stance.
“Stocks have made their way close to the upper end of their trading range. We view that disconnect as an opportunity to pull further risk off the table.”
There’s a fear of missing out on an upside move. People are also putting money in it because some believe we can have a no landing or soft economic landing scenario, which I don’t subscribe to
Charles Campbell,
managing director and trading desk specialist at Roth MKM
A handful of earnings reports also gave reason for pause, even as most companies managed — as always — to deliver results that beat analyst predictions. Construction materials supplier Fastenal said growth in March sales slowed to the lowest since June 2021.
Ally Financial’s profit plummeted as it made fewer auto loans and put aside additional provisions to cover consumer defaults. Tesla slumped 11 per cent on the week after chief executive Elon Musk indicated he’ll keep cutting prices to stoke demand.
Consistent with rising risk appetites among retail ETF buyers, a gauge of adviser sentiment kept by Investors Intelligence known as the bull/bear ratio climbed for a fourth week to its highest since the start of 2022 — the month that marked the beginning of the current bear market.
The indicator hit 1.0 in October, near its financial-crisis low, just before stocks began their current rally.
“In late October, we concluded that sentiment was so bearish it had to be bullish,” wrote Ed Yardeni, founder of Yardeni Research.
Right now, “sentiment may not be bullish enough to work as a contrary indicator for the bears, nor bearish enough to work for the bulls", he said.
“A stalemate in their tug-of-war may be the result until the recession and debt-ceiling debates are resolved, probably in early June. Then, the current bull market is likely to resume, in our opinion.”
RedCrow Intelligence Company Profile
Started: 2016
Founders: Hussein Nasser Eddin, Laila Akel, Tayeb Akel
Based: Ramallah, Palestine
Sector: Technology, Security
# of staff: 13
Investment: $745,000
Investors: Palestine’s Ibtikar Fund, Abu Dhabi’s Gothams and angel investors
UAE currency: the story behind the money in your pockets
UAE currency: the story behind the money in your pockets
Killing of Qassem Suleimani
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Washmen Profile
Date Started: May 2015
Founders: Rami Shaar and Jad Halaoui
Based: Dubai, UAE
Sector: Laundry
Employees: 170
Funding: about $8m
Funders: Addventure, B&Y Partners, Clara Ventures, Cedar Mundi Partners, Henkel Ventures
'Spies in Disguise'
Director: Nick Bruno and Troy Quane
Stars: Will Smith, Tom Holland, Karen Gillan and Roshida Jones
Rating: 4 out of 5 stars
F1 The Movie
Starring: Brad Pitt, Damson Idris, Kerry Condon, Javier Bardem
Director: Joseph Kosinski
Rating: 4/5
ELIO
Starring: Yonas Kibreab, Zoe Saldana, Brad Garrett
Directors: Madeline Sharafian, Domee Shi, Adrian Molina
Rating: 4/5
Jetour T1 specs
Engine: 2-litre turbocharged
Power: 254hp
Torque: 390Nm
Price: From Dh126,000
Available: Now
GAC GS8 Specs
Engine: 2.0-litre 4cyl turbo
Power: 248hp at 5,200rpm
Torque: 400Nm at 1,750-4,000rpm
Transmission: 8-speed auto
Fuel consumption: 9.1L/100km
On sale: Now
Price: From Dh149,900
KILLING OF QASSEM SULEIMANI
Company profile
Company name: Suraasa
Started: 2018
Founders: Rishabh Khanna, Ankit Khanna and Sahil Makker
Based: India, UAE and the UK
Industry: EdTech
Initial investment: More than $200,000 in seed funding
The five pillars of Islam
1. Fasting
2. Prayer
3. Hajj
4. Shahada
5. Zakat
More on animal trafficking
Famous left-handers
- Marie Curie
- Jimi Hendrix
- Leonardo Di Vinci
- David Bowie
- Paul McCartney
- Albert Einstein
- Jack the Ripper
- Barack Obama
- Helen Keller
- Joan of Arc
Tearful appearance
Chancellor Rachel Reeves set markets on edge as she appeared visibly distraught in parliament on Wednesday.
Legislative setbacks for the government have blown a new hole in the budgetary calculations at a time when the deficit is stubbornly large and the economy is struggling to grow.
She appeared with Keir Starmer on Thursday and the pair embraced, but he had failed to give her his backing as she cried a day earlier.
A spokesman said her upset demeanour was due to a personal matter.
Mohammed bin Zayed Majlis
At a glance
Global events: Much of the UK’s economic woes were blamed on “increased global uncertainty”, which can be interpreted as the economic impact of the Ukraine war and the uncertainty over Donald Trump’s tariffs.
Growth forecasts: Cut for 2025 from 2 per cent to 1 per cent. The OBR watchdog also estimated inflation will average 3.2 per cent this year
Welfare: Universal credit health element cut by 50 per cent and frozen for new claimants, building on cuts to the disability and incapacity bill set out earlier this month
Spending cuts: Overall day-to day-spending across government cut by £6.1bn in 2029-30
Tax evasion: Steps to crack down on tax evasion to raise “£6.5bn per year” for the public purse
Defence: New high-tech weaponry, upgrading HM Naval Base in Portsmouth
Housing: Housebuilding to reach its highest in 40 years, with planning reforms helping generate an extra £3.4bn for public finances
THE BIO
Ambition: To create awareness among young about people with disabilities and make the world a more inclusive place
Job Title: Human resources administrator, Expo 2020 Dubai
First jobs: Co-ordinator with Magrudy Enterprises; HR coordinator at Jumeirah Group
Entrepreneur: Started his own graphic design business
Favourite singer: Avril Lavigne
Favourite travel destination: Germany and Saudi Arabia
Family: Six sisters
Who are the Soroptimists?
The first Soroptimists club was founded in Oakland, California in 1921. The name comes from the Latin word soror which means sister, combined with optima, meaning the best.
The organisation said its name is best interpreted as ‘the best for women’.
Since then the group has grown exponentially around the world and is officially affiliated with the United Nations. The organisation also counts Queen Mathilde of Belgium among its ranks.
New schools in Dubai
The specs
- Engine: 3.9-litre twin-turbo V8
- Power: 640hp
- Torque: 760nm
- On sale: 2026
- Price: Not announced yet
Reading List
Practitioners of mindful eating recommend the following books to get you started:
Savor: Mindful Eating, Mindful Life by Thich Nhat Hanh and Dr Lilian Cheung
How to Eat by Thich Nhat Hanh
The Mindful Diet by Dr Ruth Wolever
Mindful Eating by Dr Jan Bays
How to Raise a Mindful Eaterby Maryann Jacobsen
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Understand What Black Is
The Last Poets
(Studio Rockers)
UAE currency: the story behind the money in your pockets
2.0
Director: S Shankar
Producer: Lyca Productions; presented by Dharma Films
Cast: Rajnikanth, Akshay Kumar, Amy Jackson, Sudhanshu Pandey
Rating: 3.5/5 stars
