Chart Book | Chart of the day: Sentiment at full stretch

Sentiment indicators are at the high end of their historic ranges, with emerging markets and energy-related plays such as Norway and Canada to the fore as liquidity-driven risk trades and geopolitical developments dominated. Optimism towards the S&P 500, Euro Stoxx 50, FTSE 100 and Nikkei-225 indices is not yet excessive, although the S&P 500 moved close to it over the past week. The potential for a near-term pullback in equities is increasing. Optimism reached over-extended levels in Asia ex-Japan equities last month and although it began to recede in recent days, it continues to run at excessive levels in Thailand and particularly in Taiwan. Given the 70 per cent-plus 10-year correlation between the Taiwan Weighted Index and the Philadelphia SOX semiconductors index, it is no surprise sentiment towards semiconductor plays is extended globally.