SMALL INVESTORS MORE BULLISH, INSTITUTIONS TURN MORE CAUTIOUS
As we begin to see the market run into some resistance a common occurrence is unfolding: small investors are turning bullish just as institutional investors begin to take some money off the table.
The latest data from the AAII shows that small investors have turned bullish once again as the AAII bullish % reading spikes up to 44%:
Meanwhile, institutional investors are paring back their risk. After 8 consecutive months of increases the State Street Investor Confidence index declined. The reading of 118 is still a sign that institutions are quite confident about accumulating risk assets, but the turn in the index could be the first sign that many institutional investors are turning more cautious:
“After eight consecutive increases in Global Investor Confidence, which took the Index from an all-time low of 82.1 during the financial crisis to a five-year high of 122.8, institutional investors took a breather this month and consolidated their holdings of risky assets,” commented Froot. “This month’s reading of 118.1 is still comfortably in the range associated with the accumulation of risk exposures, as a reading of 100 signifies neither accumulation nor decumulation. However, there is a recognition that a portion of the recent rise in global equity prices can be attributed to liquidity expansion rather than fundamental opportunities. Institutional investors are pausing to assess this balance.”
These sentiment things seem very strange to me and are probably prone to very large errors. With that being said, retailers still have not entered into the markets, even with banks and the government trying to entice them in. If retailers don’t come back into the markets, then who will all these brokerages levy their fees on? The market is very strong because big players are keeping things propped up to try and demonstrate that the market is strong even in the face of a bad economy. I mean today, the markets should be down another 2%. Worse unemployment than GS’s “revised” number and factory orders falling. Instead it is nearing positive. Hopefully the retailers are smarter this time around.