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Charging Bull Statue In Manhattan's Financial District
Investors are getting more optimistic about US equities, but improving investor sentiment is a contrarian indicator that actually gives us reason to be more worried than optimistic.
That’s according to Citigroup Chief US Equity Strategist Tobias Levkovich, who says intrastock correlations for the top 50 stocks by market cap in the S&P 500 have fallen from 86% to under 20%, Bloomberg reports. That means implied correlations have come in sharply as the stock market moves higher, and it’s well-known that in a crisis all correlations turn to one.
Levkovich says these weakening correlations suggest investors have “given up on their macro fears,” which means this positive development is a double-edged sword. [Bloomberg]
