As the market continues to seemingly move higher every day, investor complacency appears to be on the rise. The recent CBOE equity put/call ratio is at a low level of .50. Like other sentiment indicators, this measure tends to be more accurate at extremes. On April 20th we wrote about the elevated put/call ratio and wondered if the market was excessively bearish. Since the time of that post, the market has advanced over 7%.
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| From The Blog of HORAN Capital Advisors |
Additionally, fixed income assets as a percentage of all mutual fund assets recently began to decline. Are investors now warming up to equities in spite of the strong advance that has occurred year to date? On the other hand, given the low level of interest rates, bond investors are having a difficult time finding fixed income assets that provide adequate yield without taking on maturity and/or credit risk. Income yielding stocks seem to be the bond investors new bond substitute.
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| From The Blog of HORAN Capital Advisors |
Recent economic news has not been great or not as bad as economist had expected. The Empire State Manufacturing Index was below expectations, housing starts lower than expectations and industrial production lower than expectations. The employment numbers showed an improvement last week; however, it is difficult to gauge whether it is because people continue to drop out of the work force (declining participation rate) and other non favorable factors.
This is certainly a difficult point in the market cycle for investors to navigate. One thing the market does like to do is one, prove the consensus wrong and two, climb the proverbial "wall of worry."
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