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  • Christian Armbruester

Confusion



Things continue to look strange. The S&P500 is stuck around 4000, still some 20% from last year’s top. Meanwhile in Europe, we are near record highs and even the Emerging Markets have seemingly come to life. Why, nobody can quite figure out because the macroeconomic picture still looks utterly atrocious. Inflation sure doesn’t seem to be over, and yields have risen to levels not seen in decades.


Is there going to be a soft or hard landing, what about the energy prices and isn’t China supposed to be reopening? The numbers aren’t helping, and we continue to be baffled by how much more extreme they can become. The huge difference between current short and long-term interest rates is not really supposed to happen, if my economic textbooks are to be believed.


Alas, we are left with sentiment and that old pickle, in trying to predict human behaviour. Remember, more than two thirds of every developed economy is driven by consumer spending. The whole money-multiplier effect starts with us. How we think, what we do, and where we put our cash has a huge impact on everything that happens.


There are various measures of sentiment, such as the AAII's Investor Sentiment Survey, or the EC Economic Sentiment and CS Fear Index to get an indication of how people feel. Obviously, what someone may say and actually does can be two different things. However, the data does make one thing very clear: we are somewhere in the middle of the recent fairly large swings. We may just be going sideways for a while.


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