Ugly, But True. And, As Usual, Late To The Party

It is not hard to explain this comeback. All the hot button issues that set the market on end in October are way back on the back burner.

Now, based on the more balanced tone of this article from Mr. Santoli and the fine folks at CNBC (who did their level best to fuel the panic leading up to the October-December swoon), we seem to be getting a reversion to their mean message — never entirely optimistic (except at major secular tops) and always cautious.

“Investors still reluctant”

“It’s wrong to say that the broad investing public has fought this rally outright, but it’s fair to observe the crowd has been late and grudging in accepting it. Sentiment surveys and institutional-investor positioning do not reflect the optimism one would expect after a near-ceaseless 20 percent rally. It’s as if the persistence of the rally itself keeps generating concerns that the market has run ahead of itself, which continually rebuilds a wall of worry for the indexes to climb.”

I am  not sure what “crowd” Santoli is referring to, especially when you look at the work of David Templeton, CFA at Horan Capital Advisors. The chart provided in the link below gives a stunning view of what appears to be a continuing avoidance of equity risk in favor of ‘safer’ bond alternatives.

Kudos on this find to Jeff Miller and his must-read weekly piece, “Weighing The Week Ahead.”

Investors Have Missed Out On The Equity Rally (The charts herein are worth your attention)

“From 2014 to mid-2015, investors seemed to have a favorable view on stocks if one bases the observation on ETF and mutual fund flows. As the below chart shows, the increase in S&P 500 Index until mid-2015 coincided with positive flows into domestic equity focused mutual funds and ETF’s. Beginning in mid 2015 though, investor flows turned negative (maroon line.) During late 2016 and early 2017 the cumulative maroon line became less negative indicating positive flows into domestic equities, but the sharp rally from 2017 to the market’s peak at the end of the third quarter of 2018 was not supported by positive domestic equity flows. In fact, domestic equity flows have been negative to the tune of -$1.5 trillion over this five plus year period.”

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Carl Schwartz 3 months ago Member's comment

Thanks. I'm a fan of Jeff Miller as well. I read his weekly article here regularly.

Bill Kort 3 months ago Author's comment

Thanks for your readership Carl. I think Miller and Fearand Greed trader are two of the best out there for content and a well reasoned market opinion.