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Even Albert Edwards of Societe Generale, long known for his bearish views, acknowledged that excessive pessimism could prompt a near-term rally. Supporting that view, the S&P 500’s 14-day RSI recently dipped below 30, signaling oversold conditions, while sentiment surveys reflect entrenched negativity—nearly 60% of individual investors polled expect lower stock prices in the next six months.
What Do Fund Flows Reveal About Market Sentiment?
Flows confirm the mood shift. U.S. equity funds saw $33.5 billion in outflows for the week ending March 19—the largest since December. Large-cap funds bore the brunt, with $27.4 billion in redemptions, ending a three-week buying streak. Small-, mid-, and multi-cap funds also recorded net selling.
Cash wasn’t the primary beneficiary. Money market funds saw $28.8 billion in outflows, suggesting broader portfolio repositioning rather than simple rotation. Bond markets also saw cracks, with $513 million in net outflows, ending an 11-week inflow streak. Selling hit general domestic taxable funds and floating-rate debt, while Treasury funds attracted relative interest.
Are Headwinds Still a Threat?
Macro headwinds persist. President Trump’s tariff policies remain a market wildcard, with the April 2nd deadline heightening uncertainty. Corporate earnings from FedEx and Nike reflected caution, citing industrial weakness and fading consumer strength. Tech stocks, a prior rally leader, are now lagging—off 14% from recent highs after five consecutive down weeks.
Market Outlook: Relief Rally or Dead-Cat Bounce?
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