The stock market has a lot to navigate this week, from the daily dose of coronavirus gloom to a hefty lineup of earnings, including huge names like Apple
, Exxon Mobil
But if investors are worried about getting caught wrong-footed, you wouldn’t know it from this chart from Axioma, which shows that they are “uncharacteristically positive in the face of rising uncertainty about the economic rebound in the second half of the year”:
The chart shows Axioma’s recently created Qontigo ROOF score, an acronym that stands for “risk-on/risk-off.” It’s basically a gauge of how bullish investor are at any given moment.
As you can see, bullishness is currently running high.
“Investors seem still caught in a past-tense, future-perfect kind of mood having decided that they should not worry about all the facts, only those they can live with,” Axioma analysts wrote in a note this week about the divergence between market performance and fundamentals.
In their view, quantitative easing is trumping the presumption of economic fragility.
“The second wave of new infections is threatening large swath of the global economy and raising the probability of second lockdowns,” the analysts wrote. “But like the mother of a drug dealer, or the neighbor of a serial killer, investors seem to be the last to know, preferring instead to focus on the stimulus packages this will invite.” So it’s “BUY, BUY, BUY!” regardless.
Bottom line: The consensus, according to Axioma, is that even if the big earnings lineup doesn’t support the current valuations, easy money from the Fed and/or a new stimulus package will.
“Risk tolerance continues to rise and risk-aversion decline, despite a worsening Covid-19 narrative as investors recreate their own ‘fuggedaboutit’ moment,” the analysts said.
Investors were eating up stocks again in Monday’s upbeat trading session, with the Dow Jones Industrial Average
, S&P 500
and tech-heavy Nasdaq Composite
all moving higher to start the week.