- Investor sentiment has pulled back sharply, while cash levels have moved back toward a more neutral range.
- Fund managers now see oil and semiconductors as the most overcrowded trades, suggesting caution may be warranted.
- Rotation is beginning to show up in areas including Bitcoin, Canadian tech, U.S. growth, financials and the TSX Venture.
Sentiment cools as new leadership starts to emerge
In this week’s Markets in Motion, Bruce Campbell highlights how sentiment has dropped following geopolitical tension in Iran, while fund manager cash levels have climbed back into a more neutral range.
That matters because extremely low cash levels had previously signalled that markets were vulnerable to a correction — which is exactly what followed.
The survey also shows a notable change in outlook for oil, with expectations shifting higher into an US$80 to US$90 range. At the same time, oil and semiconductors are now being viewed as the most overcrowded trades, an indication that both areas may deserve a more cautious eye in the near term.
Elsewhere, market rotation is becoming more interesting. Campbell points to improving relative strength in Bitcoin, Canadian technology, U.S. growth stocks and Canadian financial services. The TSX Venture, which had weakened alongside some commodity prices, also appears to be turning higher again.
The broader message is that while parts of the market may be crowded, fresh leadership could be emerging beneath the surface.
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