I’m not a fan of most Sentiment readings. I don’t imply their present ranges, however somewhat the best way all the complicated will get used. This isn’t a brand new perception, however somewhat, a long-standing pet peeve.
Sentiment readings might be incredible opposite indicators, however they’re hardly ever actionable, after which solely when at extremes.
For instance, if you wish to use the Shopper Index as Purchase sign, it has a great monitor file for the 5 or 6 alerts it has generated over the previous 50 years. I suppose you could possibly purchase out of the cash 1-year name choices when the extent drops beneath 60 (5 alerts: 1975, 1980, 2008, 2011, and 2022) or 65 (1 sign: 1990). It’s good for a commerce, however not a lot else.
There are just a few 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 exhibiting record-high ranges of money amongst their shoppers:
Referring to the identical chart, Bloomberg famous:
“Money ranges amongst buyers hit the best degree since September 2001, the report confirmed, with BofA describing the outcomes as “extraordinarily bearish.” This month’s survey of buyers with $872 billion below administration additionally confirmed that hawkish central banks are seen as the largest threat, adopted by a worldwide recession, whereas stagflation fears have risen to the best since 2008.”
After which coincidentally, Batnick & I additionally used the identical sentiment chart (above)
However he additionally created this chart to offer 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 presently in. The typical is 13% (9% in all intervals) and was constructive 86% of the time (74% of all intervals). Not unhealthy.”
Shopper Confidence and Inventory Returns (Journal of Portfolio Administration, 2003)
Massive Up Massive Down Days (Might 5, 2022)
Too Many Bears (Might 3, 2022)
One-Sided Markets (September 29, 2021)
JPM Information to Markets, 2Q 2022, March 31, 2022