U.S. Stock Vulnerability: Declining Cash, Bearish Sentiment Raise Concerns

Several indicators that pointed to upside for U.S. stocks this year have shifted to a more neutral outlook, potentially leaving equities vulnerable to turbulence from a recent surge in bond yields and worries over China’s economy, investors said. The shift in sentiment comes as measures such as stock positioning and allocations to cash show less extreme bearishness, reflecting the market’s shift from pessimism to optimism earlier this year. However, the recent rise in bond yields and concerns over China’s property crisis have tested this newfound optimism, leaving investors uncertain about the future direction of the stock market.