Sentiment check/Credit spreads in light of this.../PMI's/Notable earnings comments

I mentioned Monday that the Citi Panic/Euphoria index is back to being in Euphoria land. Yesterday, the Investors Intelligence survey is back to extremes too with Bulls up to 59.4 from 56.5 and Bears down to 17.2, lower by .5 pt w/o/w. The spread is thus back above 40. In March, Bulls got to 61 that was the contrarian set up for a modest market pullback. In the AAII survey seen today, Bulls jumped by 6.1 pts, up for a 4th week and at 47, that is the most since early April. All of those though went to the Neutral camp as Bears were up 3 pts to 26.3 off last week's print that was the smallest since early April. The spread here is the highest since April 5th, just as a correction was beginning. 

Also, as of this writing, the VIX is trading at just 11.59, the lowest since November 2019. Bottom line, the bull boat is almost filled up again and the put buying is at multi year lows as measured by this index. 

With the high yield credit spread now lower than where they stood in January 2020 at 298 bps vs about 320 bps then and barely above the 2021 lows when rates were zero, this Bloomberg article got my attention yesterday. Titled "Something Just Flipped in Credit for the First Time Since 2020," it said "The proportion of BBB- rated bonds - those at the lowest tier of investment grade - that are now on watch for a downgrade has recently surpassed the proportion of debt on watch for upgrades for the first time since early 2020, during the depths of the pandemic." Bottom line, this asset class is certainly expensive in light of the high rate risks. https://www.bloomberg.com/news/articles/2024-05-22/something-just-flipped-in-the-credit-market-for-the-first-time-since-2020

US  High Yield Credit Spread

Yesterday the April Architecture Billings Index saw a rise to 48.3 from 43.6 though the components were mixed. The gain was led by commercial/industrial and the AIA chief economist said, "These findings indicate that while there is still caution among clients, there are also positive signs with increasing inquiries into new projects. Continued high interest rates make it difficult for some projects to move forward, but there is ongoing interest in pursuing these projects once conditions improve. In the meantime, design activity is expected to remain sluggish."

The Bank of Korea kept interest rates unchanged at 3.5% as expected but hinted just maybe they would cut by year end. There wasn't much market reaction though as the Won is little changed and the 2 yr yield was lower by 1 bp.