Wednesday, May 18, 2022
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Sentiment LOL – The Large Image


Shopper Sentiment vs. Inventory Market Returns

 

I’m not a fan of most Sentiment readings. I don’t imply their present ranges, however reasonably the way in which the complete complicated will get used. This isn’t a brand new perception, however reasonably, a long-standing pet peeve.

Sentiment readings might be incredible opposite indicators, however they’re not often actionable, after which solely when at extremes.

For instance, if you wish to use the Shopper Index as Purchase sign, it has observe file for the 5 or 6 indicators it has generated over the previous 50 years. I suppose you might purchase out of the cash 1-year name choices when the extent drops under 60 (5 indicators: 1975, 1980, 2008, 2011, and 2022) or 65 (1 sign: 1990). It’s good for a commerce, however not a lot else.

There are a number of individuals who can do that nicely, however they’re few and much between.

 

UPDATE: Might 17, 2022  5:51pm

Two charts so as to add to this one: First, Tadas featured this Financial institution of America chart displaying record-high ranges of money amongst their purchasers:

Referring to the identical chart, Bloomberg famous:

“Money ranges amongst traders hit the very best degree since September 2001, the report confirmed, with BofA describing the outcomes as “extraordinarily bearish.” This month’s survey of traders with $872 billion beneath administration additionally confirmed that hawkish central banks are seen as the largest threat, adopted by a world recession, whereas stagflation fears have risen to the very best since 2008.”

After which coincidentally, Batnick & I additionally used the identical sentiment chart (above)

However he additionally created this chart to present you a way of the place we’re in the market cycle.

“I went again to 1950 and checked out ahead 1-year returns for the S&P 500 after a drawdown just like the one we’re at the moment in. The typical is 13% (9% in all durations) and was optimistic 86% of the time (74% of all durations). Not dangerous.”

 

 

 

See additionally:
Shopper Confidence and Inventory Returns (Journal of Portfolio Administration, 2003)

 

Beforehand:
Large Up Large Down Days (Might 5, 2022)

Too Many Bears (Might 3, 2022)

One-Sided Markets (September 29, 2021)

Black Friday #Fails

 

Supply:
JPM Information to Markets, 2Q 2022, March 31, 2022

 

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