Risk trades are running wild today. November was one of the best months for equities ever and we've picked right up in December with small caps joining the party and the Russell 2000 up 2.1%. Bonds are bid as well with yields at multi-month lows across the board. In FX, that's translating into US dollar selling.
I can see the case for it all. In less that two weeks, the market has gone from pricing in 87 bps in Fed cuts next year to 127 bps in cuts and it's because of falling inflation not a crashing economy. The soft-landing (or no landing) trade is in full flight. Add in great seasonals in December and it's all-systems-go for this market.
But here's a note of caution: Yesterday's sentiment surveys measured by the American Association of Individual Investors are flashing a warning signal. The percentage of bearish investors is down to 19.6%, which is the lowest in nearly 6 years.
For me, this survey is one of the best single indicators out there for the stock market and last October it was at extreme negatives, which proved to be an incredible buying opportunity (something I highlighted at the time).