Should stock markets’ optimism fuel skepticism?

4 months ago, the financial markets’ ambiance looked more like impending apocalypse than like summery enthusiasm. Almost none news of a new global recession has survived. Economic statistics from China are being published without emotion, ongoing threats on the Eurozone – including Greece, deflation risk and Italian banks – seem to be contained and the likely rate hike by the Fed doesn’t really frighten anymore.

Have financial players sold it all in May and gone away? The transactions volume has been globally lower indeed, but traders have closed May far more bullish than bearish sending US stock markets indices just several percent away from their one-year-old record highs. Equity prices may have integrated since early 2016 the middle-term risks with some excess that’s been corrected in the meantime. Macroeconomic data is not good but stable from an international standpoint, making here the most optimistic see a support level for a near stronger than expected rebound.

The financial markets’ ambiance is often misleading and one should keep an eye on what could presage a trend reversal. Most often, a too large if not unanimous consensus should invite the investor to more caution. A Brexit that most people weren’t expecting anymore could replace current bullish optimism with harsh bearish pessimism. Get ready for increased volatility.