The S&P 500 has upward momentum right now. As of this writing it is still trading above its 125-day moving average, illustrating just how strong its run has been in the U.S. stock market. This important milestone is a sign that investor sentiment is overall heading toward the more positive. As it stands, the S&P 500 represents thousands of stocks. Only a few large companies can have an outsized impact on the total market’s performance.
Market analysts use these seven indicators to get a feel for the current moods pushing the S&P 500. Each of these indicators are equally weighted in determining a score out of 100. A reading of 100 indicates that investors are as greedy as they can be, while a reading of 0 indicates that they are extremely fearful. This emotional barometer helps to both gauge what’s driving the market and anticipate a change in the nature of investor behavior.
Recent trends suggest that equities are being treated as higher risk assets than debt securities, from S&P 500 valuation ratios. This judgment is based primarily on one critical ratio. It’s a way to measure how much stocks are beating bonds, taking the difference in 20-day returns. A reading of over 1 on this ratio indicates a negative long-term trend for the S&P 500 becoming likely. This continuing trend is an indication that investors are becoming increasingly risk-averse.
In addition to the emotional indicators, it is beneficial to analyze the current levels of the S&P 500 in relation to its historical performance over recent months. The benchmark has recorded net new 52-week highs and lows on the New York Stock Exchange (NYSE), signaling fluctuations in investor confidence and market stability.
Yet, even through these rollercoaster schools, we see evidence of safe haven demand—as measured by net outsized demand for the S&P 500. For one, investors seem to be pouring into equities as a safe haven during these uncertain times—always a positive sign for the index’s long-term health. Furthermore, the current stock price strength of the S&P 500 is notably higher than usual, yet it remains within manageable limits, suggesting that while optimism is present, it has not reached an unsustainable level.
Market momentum remains excellent, with investor buying and selling heavily on any one day. This vibrant trading environment depicts an eagerness among investors to exploit market chances, all while dodging possible pitfalls.
One other factor weighing on the S&P 500 has been its direct link to China. As we’ve seen over the decades, massive economic shifts in China have huge reverberations for U.S. markets. There are headwinds from China’s economic picture that have investors spooked and could add instability to the S&P 500.