US equity investors are too bullish and bond investors too bearish

Market signals pose 'dilemma' for investors

An ex-boss once told me that people who buy shares are optimists who look on the bright side of life, while people who buy government bonds expect the worst.

That certainly seems to ring true today, especially in the USA. The S&P 500 index is back near record highs just below 3,000 points, implying that sales and earnings at the country's largest companies should be strong for the next year or two. What is driving 'extreme price swings' in equity markets? Conversely, US Treasury yields are at a multi-year low - back below 1.5% for the 10-year bond - with the Federal Reserve talking about cutting interest rates further amid fears that global economic growth will decline. These two signals from the financial markets could not be more diff...