Russell 2000 sentiment gauge is running hot

Sentiment gauges rebounded sharply this year after a holiday-season dip, propelled by vaccine rollouts and “blue wave” US fiscal stimulus hopes. Enthusiasm for US small caps (and European stocks) is running notably high.

The chart below highlights our proprietary Composite Sentiment Indicator scores for the Russell 1000, Russell 2000, FTSE Europe ex UK and FTSE Emerging for the past year. Our CSI uses Z-scores ranging from 5 (extremely confident/overbought) to 1 (extremely fearful/oversold). We monitor extreme high or low readings for clues of impending turns in market direction, which tend to shift rapidly.

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