Fear and greed index nears key point as animal spirits return

The fear and greed index continued rising this week as investors embrace a risk-on sentiment during the ongoing bull run. The index, which tracks several important sub-indices, rose to 73, higher than the year-to-date high of 63. It is also much higher than its 2023 low of 21.

Now, the index is approaching the extreme greed zone of 75, signaling that investors have embraced the so-called animal spirits as the earnings season powers on. A closer look shows that the junk bond demand, safe-haven demand, while the market momentum has jumped to the extreme greed zone.

On the other hand, the stock price strength and stock price are at the greed zone. This is a sign that investors are getting greedy as stocks continue rising. The S&P 500, Nasdaq 100, and the Dow Jones indices have surged to their record highs.

Analysts expect that US equities will continue rising in the coming months, thanks to growing earnings. Companies like Netflix, Johnson & Johnson, Abbott, and AT&T have all published strong results.

Looking ahead, the top companies to watch this week will be Visa, Intel, T-Mobile, NextEra Energy, Comcast. In all, most companies in the S&P 500 index will publish their results in the next two weeks. In a note on Tuesday, Lori Calvasina, an analyst at RBC estimated that the S&P 500 index will rise by about 8% this year.

In addition to earnings, analysts expect that the Federal Reserve will provide additional catalyst to equities. Most economists expect the Fed will start cutting interest rates in June if inflation resumes its downward trend. They caution that inflation could remain higher for a while because of the Red Sea crisis. 

US equities are being supported by the rising IT spending, resilient consumer spending, and the ongoin government spending.