CHART OF THE DAY: SENTIMENT AND LIQUIDITY
Barry Ritholtz at The Big Picture posted a great chart the other day on liquidity and sentiment. He notes some interesting commentary from his partner Kevin Lane at Fusion Analytics:
As seen above in the chart above individual investor allocations to equities has only recently moved back above its 21 year mean allocation of 60%. The massive under allocation to equities in late 2008 into the 2009 low was one of the major reasons we became so bullish on stocks since it suggested that selling was washed out of the market and that massive liquidity (aka – buying power) was built up ready to buy back into stocks.
Although investors have moved to a slightly overweight position they do not currently see the sentiment levels as alarmingly high as we saw near other major market tops. Therefore, they think stocks have the potential to move higher and that downturns will likely be opportunities to add to equities. See the full commentary from Lane at The Big Picture.
Source: TBP
i;m actually quite shocked that it’s already this high again. evidence that the popular mania for equity continues in spite of it all!
ritholtz knows his stuff and i’m not going to be much of a foil for him, but consider the lack of reallocation between 1987 and 1990. what do we imagine this series looked like between 1929 and 1945? i think that’s an important question.
The levels of debt in the economy and the weak consumer flaw this comparison. How can you compare today with the US $12t in debt versus prior years where the national debt was only $5t…not only that, but you now have the highest unemployment rate since the great depression. I would suggest that given the deteriorating fundamental in our economy, that the levels are alarmingly high. Interesting chart and graph nonetheless.
Draw a line from the top and it’s clear that lower highs are in store for this chart and other comments are spot on with current conditions never dealt with before.