Markets tend to veer between two extremes: fear and greed. But right now, the dominant emotion appears to be confusion.This may seem strange. After all, global equities have just notched up their best month in more than three years, as the panic that gripped investors in December has dissipated. The bond market has also clawed back most of the losses it suffered last year, helped by the US Federal Reserve’s abrupt decision to pause interest rate increases and willingness to re-examine how quickly it will sell its bond holdings.
And yet, many investors admit a gnawing and growing unease. Where once there was certainty — whether bearish or bullish — there is now mostly doubt and indecision. As one top hedge fund manager says: “No one has a view, and everyone is positioned accordingly.”
Some think the new year rally will fizzle out, but are too cautious to bet on it given how painful being in cash or “short” can be if markets keep climbing. Others think another extended bull run is on the horizon, but are still nursing the wounds inflicted by 2018 and fear being pummelled should turbulence return.