Posted by: jhamon | July 3, 2009

Confidence Index Points To Bottom

From Prieur du Plessis:

…a confidence indicator worth monitoring is the Barron’s Confidence Index. This Index is calculated by dividing the average yield on high-grade bonds by the average yield on intermediate-grade bonds… There has been a solid improvement in the ratio since its all-time low in December, showing that bond investors are growing more confident and have started opting for more speculative bonds over high-grade bonds.

The improvement in the Barron’s indicator augurs well for the outlook for equities – specifically for the return of confidence – and provides further evidence that US stock markets are in all likelihood mapping out a base development formation. However, in the short term I still maintain it is quite likely that markets could consolidate further and possibly retrace more of the prior gains.

 

Baron

S&P 500 Strongly Correlated to Barron's Confidence Index.

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