Investors’ optimism about the short-term outlook for the stock market increased slightly as the constant chatter of a possible Fed rate cut in September and earnings reports from top-tier companies remained in the spotlight.
A total of 44.9% of respondents, as per the AAII Sentiment survey, showed optimism, compared to 43.2%, a week ago.
The survey has been conducted by the American Association of Individual Investors (AAII) since 1987, in which it asks respondents for their thoughts on where the market is heading in the next six months.
The week saw the tech selloff picking up steam as investors were quite disappointed with “Magnificent 7” members Alphabet (GOOG)(GOOGL), Tesla (TSLA) and Microsoft (MSFT) after the companies provided Wall Street with weaker quarterly results.
However, other big names like Pfizer (PFE), McDonald’s (MCD) and Advanced Micro Devices (AMD) shot up following the release of financial results.
Expectations for a half-percentage point rate cut in September also climbed after Federal Reserve Chair Jerome Powell said the possibility of rate easing starting in September is “on the table” if inflation continues to show progress toward moving down to the Fed’s 2% goal.
Neutral sentiment for the week ending July 31 also increased, with 29.9% of investors polled by AAII seeing no change in the market direction, compared to 25.1%, a week earlier. The percentage of those surveyed who felt bearish stood at 25.2% versus 31.7% last week.
Seeking Alpha author Manika Premsingh said in terms of macroeconomic data, the US economy is very close to “hitting the sweet spot” of low inflation and sustained GDP growth.
“It remains to be seen whether the balance of growth and inflation can continue. In this environment, defensive investments with some exposure to cyclicals can be ideal,” added Premsingh.
The S&P 500 Index (SP500) advanced over 2% in the last one week, while Dow Jones Industrial Average Index (DJI) gained over 2%. Both NASDAQ Composite Index (COMP:IND) and NASDAQ 100-Index (NDX) gained 2.4% and 2.8% respectively.
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