It was a rough week overall for global investors and the comments from the FOMC made things worse not better. The focus prior to the Fed meeting had been on what the long term impact of negative bond yields could have on the world's economy and whether voters in the UK would decide to leave the European Union. The Fed's concern over the health of the US economy and the polls that currently suggest that UK citizens now favor leaving have heaped more pressure on the indecisive investor. In last week's AAII survey the bullish% dropped to 25.4% and is now further below its long term average. Though it is difficult to really assess the professional sentiment we do know that many high profile hedge fund managers are expecting a sharp market decline. Based on commentary in the financial media and blogs it does not seem many are looking for higher prices. As I cover in more detail in the Market Wrap section the stock market looked ready to complete its correction in the middle of last week but it did not generate enough positive momentum to signal that the market had turned the corner. This may happen this week but the spike in the VIX is a sign that the fear trade is the most popular now. The possible exit of Greece from the Euro zone monetary union had been a concern during most of the market corrections since the bull market began. In each instance I thought it was unlikely as the economic costs with the common currency were too high. In 2010, 2011and 2012 it was even more important that the technical analysis of the US stock market indicated that they were just corrections and not warnings of a major top. The fear trade did not work then as many sold their long positions near the market lows. I would argue that it is not the best trade for most right now.
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