The Short View in today’s FT argues that fundamental problems and sentiment indicators are good reasons to expect the equity markets to go down (in a qualified way, admittedly). The article ends as follows:

There are real risks in many different places and the chance of a sharp correction looks high. In that context, Tuesday’s falls for stock markets around the world look surprisingly muted.

And that is why I am long the S&P 500.

  1. If all this bad news has failed to defeat the recent breakout in the S&P, that is bullish.
  2. Sentiment surveys may be contrarian because a good survey shows that everyone is already in. But in this case, I don’t think that the fact that individual investors are already in the market is the important thing. I think that equity markets are being driven upwards by liquidity, which everybody seems to have forgotten about.