Markets mixed, “pain trade remains up”

Markets were mixed on Tuesday.

The S&P 500 fell 0.3 percent and the Nikkei 225 fell 0.7 percent but the STOXX Europe 600 rose 0.3 percent.

“The bullish move that some equity markets enjoyed thanks to the slight improvement in U.S.-China trade talks, and the chatter about the Federal Reserve lowering rates, has run out of steam, and some traders are taking a breather,” wrote David Madden, market analyst at CMC Markets UK.

However, the latest Bank of America Merrill Lynch fund managers survey suggests that there is room for further gains as cash allocations remain well ahead of historical averages.

“The dovish Fed and trade truce have caused investors to reduce cash and add risk, but their expectations of an earnings recession and debt deflation still dominate sentiment,” Michael Hartnett, BofAML’s chief investment strategist, said in a statement. “The pain trade for the summer remains up in stocks and yields.”