Investors are increasingly cautious as a series of bearish signals accumulate in the stock market. The Conference Board's monthly household survey reveals that consumer expectations for continued stock rallies are at their highest in nearly 40 years. However, the divergence between those expecting stock gains and those anticipating declines is the widest since the financial crisis, suggesting a potential contrarian indicator. Additionally, Federal Flow of Funds data indicates that US households are as heavily invested in equities as ever, limiting further upside potential due to a lack of new investment inflows.
Fund managers have also reduced cash holdings to record lows, channeling funds into US stocks, a move that Bank of America warns could signal an overbought market ripe for correction. The S&P 500's gains are concentrated in a few companies, highlighting weak market breadth and increasing the risk of a market correction. Investors are now keenly awaiting the Federal Reserve's monetary policy decision on Wednesday, with expectations of a hawkish 25-basis-point rate cut. Any indication of caution in future rate cuts from the Fed could further fuel bearish sentiment by maintaining higher borrowing costs.
The S&P 500 Index is currently at 6,050.60 as of 16:01 on December 17, slightly down from its last close of 6,074.08. The index opened at 6,052.55, with an intraday high of 6,057.68 and a low of 6,035.19, reflecting the market's cautious stance amid these accumulating bearish signals.