Signs Of Cautious Investor Optimism On US Economy As Sentiment Improved In December: Spectrum Markets

• SERIX sentiment for the three main US indices rebounded slightly after intensely bearish November
• European investors responded to signs of optimism for US Economy in December
• 123.6 million securitised derivatives were traded on Spectrum last month

Spectrum Markets (“Spectrum”), the pan-European trading venue for securities, has published its SERIX sentiment data for European retail investors for December, revealing signs of a cautious recovery in sentiment towards US indices after America saw economic boost.

December SERIX sentiment towards the three major US indices improved noticeably following November’s sharp dip, though fell short of bullish territory. S&P 500 increased from 89 to 95, NASDAQ 100 grew from 93 to 98 and the DOW 30 marginally increased to 96 from 95.

The SERIX value indicates retail investor sentiment, with a number above 100 marking bullish sentiment, and a number below 100 indicating bearish sentiment. (See below for more information on the methodology).

Market opinion

European retail investor sentiment towards key US indices, as reflected in the associated SERIX values, showed modest improvement against a backdrop of growing optimism for the US economy.

The growth in confidence followed a rare drop in US inflation after 3.5 years, which led to increased spending, subsequently boosting financial market expectations. The Federal Reserve’s indication to cut interest rates for the first time since 2020 likely contributed further to this positive shift in sentiment.

The improvements in the US economy were most notably driven by a service sector boost, with retail also seeing a turnaround, as December data from the US Department of Commerce showed retail sales surpassed expectations. Several economists raised their growth projections for the fourth quarter in response.

“European retail investors displayed extreme bearish sentiment in November across the three major US indices, with the SERIX for S&P 500, NASDAQ 100 and DOW 30 reaching lows not seen since the summer of 2021. Although still leaning bearish overall, there appeared to be softening of this point of view in December, with less investor pessimism reflected in our SERIX data as the year concluded,” says Michael Hall, Head of Distribution at Spectrum Markets.

“Despite a more encouraging economic outlook, and a strengthening of the underlying market indices, our data suggests some caution remained among European investors as far as the US was concerned, though the recent easing of financial conditions seems to have prompted a notable shift in retail investors’ trading behaviour,” adds Hall.

Spectrum’s December data

In December 2023, 123.6 million securitised derivatives were traded on Spectrum, with 34.6% of trades taking place outside of traditional hours (i.e., between 17:30 and 9:00 CET).

83.8% of the traded derivatives were on indices, 9.7% on currency pairs, 3.7% on commodities, 2.6% on equities and 0.2% on cryptocurrencies, with the top three traded underlying markets being DAX 40 (28.2%), NASDAQ 100 (23.6%) and S&P 500 (17.4%).

Looking at the SERIX data for the top three underlying markets, the DAX 40 remained bearish at 97, the NASDAQ 100 increased slightly to 98, similarly with the S&P 500 which saw an increase to a consistently bearish 95.