The American Association of Individual Investors (AAII) reported in its weekly survey on September 16th that bearish sentiment reached 53.3%.
This is the highest level in 16 months, while bullish sentiment stands at 28.8%, a one-year low.
This means that market participants are currently viewing the market itself pessimistically.
The reasons could include interest rate hikes, soaring bond yields, and unpredictable market volatility. Recently, there have been opinions that US consumption is decreasing due to a decline in sales by consumer giants such as Walmart and Costco.
Paradoxically, however, technology stocks in the US market are rising.
While some experts argue that when bearish sentiment exceeds 50%, all bad news has already been priced in and the market is oversold, indicating a bottom,
the market has entered a downward phase due to concerns over bond yields, but there hasn't been a significant adjustment compared to June and July. The market feels strangely volatile.
The 10-year Treasury yield, which everyone considered a risk zone, has already surpassed 5%,
and a new narrative is emerging. Big tech companies are seen as having strong financial health that far exceeds current interest rates and high investment appeal. Ultimately, it's believed that even if interest rates rise, big tech will not face problems with capital raising, and the 10-year Treasury yield is unlikely to exceed 5.3%.
If high interest rates begin, it could create a bearish environment for growth stocks burdened by interest expenses. Conversely, there's a prediction that high interest rates will lead to a preference for capital in memory semiconductor companies with strong current earnings and share buyback capacity.
Entropic's IPO in November could temporarily create a "black hole" by sucking up capital due to supply shortages. Personally, if Entropic doesn't stop investing in facilities, and Micron's third-quarter earnings surprise after its release, I expect a big rebound in the semiconductor sector lasting until December.
If guidance from three semiconductor companies is revised upward during the third-quarter earnings releases, the lower support line will rise significantly. At that point, large investors may increase their holdings through quarterly rebalancing.
While oil prices and bond yields are putting pressure on growth stocks, the current market sentiment seems to be "stocks will go up anyway." It's scary to think how big a correction could be if one were to occur...
