Greed is making a serious comeback on Wall Street

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1. Risk on: Everything from junk bonds and crude oil to General Electric and emerging markets has raced back to life.

The Nasdaq is up nearly 10% on the year. The S&P 500 just celebrated its best January in 32 years.

Bullish investors have emerged from their late 2018 hibernation. Cash is piling back into the riskiest corners of the market.

Fears of a recession induced by Federal Reserve rate hikes and US-China trade war have faded. They’re morphed into hopes of a “soft landing” for the economy engineered by the suddenly-patient Fed and progress on trade talks. The CNN Business Fear & Greed Index went from “extreme fear” a month ago to “greed” today.

It’s a fresh reminder of how quickly sentiment can shift on Wall Street, which suffered its worst December since the Great Depression.

“The market oversold tremendously in December,” said David Kelly, chief global strategist at JPMorgan Funds. “The things that fell the most were the ones likely to the rise the most.”

Hence the snap-back rally for crude oil, which crashed into a bear market last year. US oil prices are up 22% so far in 2019.

Ditto for GE (GE), which plunged 56% last year. GE is up 34% so far in 2019. It’d be the best stock in the Dow — if it hadn’t been kicked out last summer. Other big 2018 losers like Zions Bank (ZBK), Coty (COTY) and General Mills (GIS) are all up double-digits this year.
The junk bond market ground to a halt in December. Exactly zero US high yield bonds getting issued for the first time since the financial crisis. Junk bond sales remain slow, but the market has stabilized. Junk bond ETFs, including the iShares iBoxx High Yield Corporate Bond ETF (HYG), have soared back to all-time highs.

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