18 JULY 2024
The chart below adds weight to the argument that equity markets may take a breather over the summer.
The Chicago Board Options Exchange (CBOE) equity put/call ratio measures the trading volume of put options relative to call options.
A high ratio suggests investors are overly bearish and that equity markets are more likely to rise than fall, at least in the near-term. The converse is true when the ratio is at an extreme low.
In late June the ratio fell to 0.8, a 12 month low and consistent with the level it hit last summer when markets were entering into a mild “risk off” phase.
It’s important to note this metric typically has little bearing on longer-term market trends and, in general, the near 2-year bull market in equities looks set to continue, albeit after a likely period of digestion.
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