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Friday, April 20, 2018 8:40:15 AM
Sentiment Changes On Stocks
By: Seeking Alpha | April 19, 2018
April 2018 Positioning: Stock Decreased but Still Overweight
We decreased our stock allocation in April from 71% to 66%, increased our bond allocation from 28% to 34%, and decreased our cash allocation from 1% to 0%. Our regional equity allocation shifts included decreased allocations to Europe ex. U.K., Japan, and the U.S. The U.S. equity allocation changes include a larger allocation to large-cap growth and a smaller allocation to large-cap value.
Asset Class Positioning vs. Neutral Allocation, April 2018
Weight-of-the-Evidence
The market is reacting to powerful forces: potential trade wars, concerns about inflation, and rising interest rates. These are complex issues. Trying to predict successfully how these scenarios will unfold and impact the market is no small feat. We spoke of how the model reacts to market events on a recent investor call. Our friends and partners at Ned Davis Research participated, and Lisa Michalski, Associate Director at Ned Davis Research, commented: "What does the model predict? It doesn't predict anything. It responds to events as they happen." This is exactly right.
The model responds to events that are not specifically included in it from reading the market. Global markets respond quickly. We use this to our advantage. Heavily incorporating market price action and investor sentiment allows us to quickly adapt to the risks in the market. Since the beginning of the sell-off, we have reduced our equity exposure by 20%.
The most recent indicator to change from neutral to bearish is U.S. investor sentiment. This is a contrarian indicator designed to measure and respond to investor psychology. It comprises various components, such as investor surveys, asset flows, implied volatility, and trading volume. As you can see from the chart below, investor sentiment quickly changed from a state of extreme optimism to a state of extreme pessimism in March. This led to our reduction in equities from 71% to 66% in April alone.
NDR U.S. Sentiment Indicator
Source: Ned Davis Research. Data as of March 31, 2018. Past performance is no guarantee of future results. Chart is for illustrative purposes only.
Our current asset class positioning, near neutral, is reflective of the conflicting evidence collected from the indicators. Right now, market technical readings are mixed, investor sentiment is bearish, stock valuations are stretched, global growth is strong, and global monetary policy is accommodative-a real mixture of pros and cons pointing neither up nor down.
NDR Indicator Summary
https://seekingalpha-com.cdn.ampproject.org/c/s/seekingalpha.com/amp/article/4163936-sentiment-changes-stocks?utm_source=Twitter&utm_medium=Organic%20Social&utm_term=Marketing&utm_campaign=Marketing
• DiscoverGold
By: Seeking Alpha | April 19, 2018
April 2018 Positioning: Stock Decreased but Still Overweight
We decreased our stock allocation in April from 71% to 66%, increased our bond allocation from 28% to 34%, and decreased our cash allocation from 1% to 0%. Our regional equity allocation shifts included decreased allocations to Europe ex. U.K., Japan, and the U.S. The U.S. equity allocation changes include a larger allocation to large-cap growth and a smaller allocation to large-cap value.
Asset Class Positioning vs. Neutral Allocation, April 2018
Weight-of-the-Evidence
The market is reacting to powerful forces: potential trade wars, concerns about inflation, and rising interest rates. These are complex issues. Trying to predict successfully how these scenarios will unfold and impact the market is no small feat. We spoke of how the model reacts to market events on a recent investor call. Our friends and partners at Ned Davis Research participated, and Lisa Michalski, Associate Director at Ned Davis Research, commented: "What does the model predict? It doesn't predict anything. It responds to events as they happen." This is exactly right.
The model responds to events that are not specifically included in it from reading the market. Global markets respond quickly. We use this to our advantage. Heavily incorporating market price action and investor sentiment allows us to quickly adapt to the risks in the market. Since the beginning of the sell-off, we have reduced our equity exposure by 20%.
The most recent indicator to change from neutral to bearish is U.S. investor sentiment. This is a contrarian indicator designed to measure and respond to investor psychology. It comprises various components, such as investor surveys, asset flows, implied volatility, and trading volume. As you can see from the chart below, investor sentiment quickly changed from a state of extreme optimism to a state of extreme pessimism in March. This led to our reduction in equities from 71% to 66% in April alone.
NDR U.S. Sentiment Indicator
Source: Ned Davis Research. Data as of March 31, 2018. Past performance is no guarantee of future results. Chart is for illustrative purposes only.
Our current asset class positioning, near neutral, is reflective of the conflicting evidence collected from the indicators. Right now, market technical readings are mixed, investor sentiment is bearish, stock valuations are stretched, global growth is strong, and global monetary policy is accommodative-a real mixture of pros and cons pointing neither up nor down.
NDR Indicator Summary
https://seekingalpha-com.cdn.ampproject.org/c/s/seekingalpha.com/amp/article/4163936-sentiment-changes-stocks?utm_source=Twitter&utm_medium=Organic%20Social&utm_term=Marketing&utm_campaign=Marketing
• DiscoverGold
Information posted to this board is not meant to suggest any specific action, but to point out the technical signs that can help our readers make their own specific decisions. Your Due Dilegence is a must!
• DiscoverGold
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