October 09, 2024
11:00 AM- 12:00 PM New York Time
Information you provide when registering will be shared with the account
owner and host and can be used and shared by them in accordance with
their Terms and Privacy Policy.
'Extreme Fear' in Sentiment Hid a Silver Lining: Taking Stock
By Esha Dey, Bloomberg, August 9, 2024
The stock-bond ratio, which compares the S&P 500 Index against a long-dated Treasury to test whether stocks are cheap or expensive compared to bonds, also serves as a measure of market sentiment, said Dean Christians, senior research analyst at SentimenTrader. Similar periods of panic-driven fear in the past were followed by excellent returns for the benchmark index, Christians' analysis found.Since 1962, the ratio dipped this far only 13 other times, and in more than 90% of those instances, the S&P 500 rallied a year later. Technology stocks outpaced the wider index over the following year on average, as well as defensive groups like consumer staples and health care.“The stock/bond ratio plunged to a historically low level as traders abandoned stocks in favor of bonds in a deleveraging unwind of the yen-carry trade," Christians wrote in a note to clients this week. The ratio, calculated using the SPDR S&P 500 ETF Trust and the iShares 20+ Year Treasury Bond ETF, fell to negative 3.75 on Monday, the analyst said.Since then, the ratio has recovered as stocks rallied back hard on Thursday and was hovering around negative 1.4 after Thursday's market close, the analyst noted.