Stocks at record levels on positive “mood music” around trade talks

The Big Number
The current measure of retail investor sentiment as tracked by a weekly survey conducted by the American Association of Individual Investors (AAII) is at its highest level in 27 weeks.

What this means
Bullish retail investor sentiment as tracked by AAII hit its highest level in 27 weeks, matching an earlier peak reached just before the China trade talks fell apart in May.  In spite of all the noise and political drama, investors are feeling better about the market.

Market Notes
Sentiment around the China trade talks continued to improve with Lawrence Kudlow, the director of the U.S. National Economic Council, saying that the “mood music is pretty good.”  In Washington, the public phase of the impeachment hearings kicked off and was largely ignored by markets.

The Markets’ Reaction
Stocks were up for the sixth week in a row, with the S&P 500 (SPX) climbing 0.9% to a new record high. International developed markets trailed, up 0.1% (MXEA), while emerging market equities fell -1.5% (MXEF). Spreads on investment grade bonds were flat, and high yield spreads widened by five basis points.

What to Watch
Protests in Hong Kong continue to intensify, and concern is rising that China will intervene militarily.  This week sees notes from the latest Federal Reserve meeting released on Wednesday, and flash Purchasing Manager Index (PMI) data for the U.S., E.U., and Japan out on Friday.

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