NEW YORK, Aug 18 (Reuters) – Several indicators that pointed to upside for U.S. stocks this year have shifted to a more neutral outlook, potentially leaving equities vulnerable to turbulence from a recent surge in bond yields and worries over China’s economy, investors said.
Some investors watch so-called contrarian indicators to gauge the market’s mood, with extreme pessimism thought to be a good sign to buy and vice versa. At the start of the year, measures such as stock positioning and allocations to cash showed extreme bearishness, reflecting investors’ grim outlook following a brutal selloff in 2022 and expectations of a recession in the second half of this year.
But signs of a resilient economy and cooling inflation drew investors off the sidelines and bolstered risk appetite in the months that followed, fueling a nearly 14% rise in the S&P 500 this year. The upshot, some…
