Systematic Relative Strength

Question 1. Based on their behavior, are your clients currently more afraid of: a) getting caught in a stock market downdraft, or b) missing a stock market upturn?

Chart 1: Greatest Fear.  From survey to survey, the S&P 500 fell -3.5%, and client sentiment worsened as expected.  The fear of downturn group rose from 80% to 85%, while the fear of a missed opportunity group fell from 20% to 15%.  Client sentiment remains poor overall.

Chart 2. Greatest Fear Spread.  Another way to look at this data is to examine the spread between the two groups.  The spread ticked higher this round, from 60% to 71%.

Question 2. Based on their behavior, how would you rate your clients’ current appetite for risk?

Chart 3: Average Risk Appetite.  Once again, the average risk appetite performed as expected, falling from 2.77 to 2.55.  Technically speaking, this indicator has broken through solid support on the downside.

Chart 4: Risk Appetite Bell Curve. This chart uses a bell curve to break out the percentage of respondents at each risk appetite level.  We’ve seen a dramatic shift to less risk over the last few surveys.  right now, the majority of clients want either a risk appetite of 2 or 3.

Chart 5: Risk Appetite Bell Curve by Group. The next three charts use cross-sectional data. This chart plots the reported client risk appetite separately for the fear of downdraft and for the fear of missing upturn groups.  This chart sorts out mostly as expected, with the upturn group wanting more risk than the downturn group.

Chart 6: Average Risk Appetite by Group.  This round, both groups’ risk appetite fell with the market.

Chart 7: Risk Appetite Spread.  This is a spread chart constructed from the data in Chart 6, where the average risk appetite of the downdraft group is subtracted from the average risk appetite of the missing upturn group.  The spread fellthis round and is sitting pretty in its normal range.

The S&P 500 fell by -3.5% from survey to survey, and all of our indicators responded in-kind.  The fear of a downturn group rose, and overall risk appetite fell.  We’d expect to see both of those occuring when client sentiment is worsening.

No one can predict the future, as we all know, so instead of prognosticating, we will sit back and enjoy the ride. A rigorously tested, systematic investment process provides a great deal of comfort for clients during these types of fearful, highly uncertain market environments. Until next time, good trading and thank you for participating.

As you know, when individuals self-report, they are always taller and more beautiful than when outside observers report their perceptions!  Instead of asking individual investors to self-report whether they are bullish or bearish, we’d like financial advisors to weigh in and report on the actual behavior of clients.  It’s two simple questions and will take no more than 20 seconds of your time. We’ll construct indicators from the data and report the results regularly on our blog–but we need your help to get a large statistical sample!

Click here to take Dorsey, Wright’s Client Sentiment Survey.

Contribute to the greater good!  It’s painless, we promise.

Question 1. Based on their behavior, are your clients currently more afraid of: a) getting caught in a stock market downdraft, or b) missing a stock market upturn?

Chart 1: Greatest Fear.  From survey to survey, the S&P 500 rose +2.4%, and client sentiment improved as a result.  The fear of downturn group fell from 90% to 80%, while the upturn group rose from 10% to 20%.  Client sentiment is still poor overall, but it’s nice to see a rally have some effect.

Chart 2. Greatest Fear Spread.  Another way to look at this data is to examine the spread between the two groups.  The spread dipped lower this round, from 80% to 60%.

Question 2. Based on their behavior, how would you rate your clients’ current appetite for risk?

Chart 3: Average Risk Appetite.  After falling for two straight surveys, the overall risk appetite bounced back this round (barely), from 2.70 to 2.77.

Chart 4: Risk Appetite Bell Curve. This chart uses a bell curve to break out the percentage of respondents at each risk appetite level.  We saw a more even distribution this round, though tilted towards less risk.

Chart 5: Risk Appetite Bell Curve by Group. The next three charts use cross-sectional data. This chart plots the reported client risk appetite separately for the fear of downdraft and for the fear of missing upturn groups.  This chart sorts out mostly as expected, with the upturn group wanting more risk than the downturn group.

Chart 6: Average Risk Appetite by Group.  This round, the upturn group’s average shot higher, while the downturn group’s average fell slightly.  Keep in mind that overall risk ticked slightly higher with the market.

Chart 7: Risk Appetite Spread.  This is a spread chart constructed from the data in Chart 6, where the average risk appetite of the downdraft group is subtracted from the average risk appetite of the missing upturn group.  The spread moved higher this round and seems to be settled into a new range.

From survey to survey, the S&P rallied over +2%, and our client sentiment indicators responded as they should.  The fear of a downturn group moved lower, while risk appetite moved higher.  All in all, it was a pretty standard client sentiment reaction to market behavior.

No one can predict the future, as we all know, so instead of prognosticating, we will sit back and enjoy the ride. A rigorously tested, systematic investment process provides a great deal of comfort for clients during these types of fearful, highly uncertain market environments. Until next time, good trading and thank you for participating.

As you know, when individuals self-report, they are always taller and more beautiful than when outside observers report their perceptions!  Instead of asking individual investors to self-report whether they are bullish or bearish, we’d like financial advisors to weigh in and report on the actual behavior of clients.  It’s two simple questions and will take no more than 20 seconds of your time. We’ll construct indicators from the data and report the results regularly on our blog–but we need your help to get a large statistical sample!

Click here to take Dorsey, Wright’s Client Sentiment Survey.

Contribute to the greater good!  It’s painless, we promise.

Question 1. Based on their behavior, are your clients currently more afraid of: a) getting caught in a stock market downdraft, or b) missing a stock market upturn?

Chart 1: Greatest Fear.  From survey to survey the S&P 500 fell -2.7%, and the greatest fear levels snapped higher.  The fear of a downdraft group rose from 74% to 90%, the highest levels we’ve seen all year.  The missed opportunity group fell from 26% to 10%.  Client sentiment is back in the doghouse.

Chart 2. Greatest Fear Spread.  Another way to look at this data is to examine the spread between the two groups.  The spread shot higher this round from 47% to 80%.  We’re a long way from par again!

Question 2. Based on their behavior, how would you rate your clients’ current appetite for risk?

Chart 3: Average Risk Appetite.  The overall risk appetite number has fallen for two straight surveys in a row.  This round the overall average fell from 2.85 to 2.7, dropping with the market.

Chart 4: Risk Appetite Bell Curve. This chart uses a bell curve to break out the percentage of respondents at each risk appetite level.  This round, over half of all respodents wanted a risk appetite of 3.  However, there has been a noticeable shift towards less risk, with both 1 and 2 gaining ground.

Chart 5: Risk Appetite Bell Curve by Group. The next three charts use cross-sectional data. This chart plots the reported client risk appetite separately for the fear of downdraft and for the fear of missing upturn groups.  This chart sorts out mostly as expected, with the upturn group wanting more risk than the downturn group.  However, there were so few respondents in the opporunity camp, that the distribution is slightly skewed from normal.

Chart 6: Average Risk Appetite by Group.  This round, the downturn group’s appetite rose slightly, and the upturn group’s appetite fell by a large degree.  Keep in mind the overall average fell with the market.

Chart 7: Risk Appetite Spread.  This is a spread chart constructed from the data in Chart 6, where the average risk appetite of the downdraft group is subtracted from the average risk appetite of the missing upturn group.  The swung lower this round.

From survey to survey, the market took a sizeable hit, and our client sentiment indicators responded like they should.  The greatest fear numbers rose to its highest level we’ve seen so far this year.  The overall risk appetite fell for the second straight survey round in a row.  When taking into account our client survey and the continued outflows from equities, it’s obvious that clients are not ready to jump back into the stock market.  Keep in mind the market is still up more than 20% from its Fall 2011 lows.

No one can predict the future, as we all know, so instead of prognosticating, we will sit back and enjoy the ride. A rigorously tested, systematic investment process provides a great deal of comfort for clients during these types of fearful, highly uncertain market environments. Until next time, good trading and thank you for participating.

As you know, when individuals self-report, they are always taller and more beautiful than when outside observers report their perceptions!  Instead of asking individual investors to self-report whether they are bullish or bearish, we’d like financial advisors to weigh in and report on the actual behavior of clients.  It’s two simple questions and will take no more than 20 seconds of your time. We’ll construct indicators from the data and report the results regularly on our blog–but we need your help to get a large statistical sample!

Click here to take Dorsey, Wright’s Client Sentiment Survey.

Contribute to the greater good!  It’s painless, we promise.

Question 1. Based on their behavior, are your clients currently more afraid of: a) getting caught in a stock market downdraft, or b) missing a stock market upturn?

Chart 1: Greatest Fear.  From survey to survey, the S&P 500 was flat.  After hitting all-time lows last round, the greatest fear number rose from 62% to 74%.  On the flip side, the missed opportunity group fell from 38% to 26%.

Chart 2. Greatest Fear Spread.  Another way to look at this data is to examine the spread between the two groups.  The spread rose from 24% to 47%.

Question 2. Based on their behavior, how would you rate your clients’ current appetite for risk?

Chart 3: Average Risk Appetite.  In line with the greatest fear numbers, average risk appetite also ticked lower, from 3.02 to 2.85.  It’s not too surprising, given the fact that the overall number has been rising steadily all year.

Chart 4: Risk Appetite Bell Curve. This chart uses a bell curve to break out the percentage of respondents at each risk appetite level.  This round, over half of all respodents wanted a risk appetite of 3.

Chart 5: Risk Appetite Bell Curve by Group. The next three charts use cross-sectional data. This chart plots the reported client risk appetite separately for the fear of downdraft and for the fear of missing upturn groups.  This chart sorts out as expected, with the upturn group wanting more risk than the downturn group.

Chart 6: Average Risk Appetite by Group.  This round, the upturn group’s risk appetite rose, while the downturn group’s risk appetite fell.  This is what we’d expect to see.

Chart 7: Risk Appetite Spread.  This is a spread chart constructed from the data in Chart 6, where the average risk appetite of the downdraft group is subtracted from the average risk appetite of the missing upturn group.  The spiked higher this round.

From survey to survey, the market was flat, and our indicators moved towards less risk.  The overall fear number rose, and overall risk appetite fell.  This is not too surprising, considering the greatest fear number hit all-time lows last round, and overall risk appetite was just off all-time highs.  With any luck, client sentiment should continue to improve if the market continues to rally.

No one can predict the future, as we all know, so instead of prognosticating, we will sit back and enjoy the ride. A rigorously tested, systematic investment process provides a great deal of comfort for clients during these types of fearful, highly uncertain market environments. Until next time, good trading and thank you for participating.

As you know, when individuals self-report, they are always taller and more beautiful than when outside observers report their perceptions!  Instead of asking individual investors to self-report whether they are bullish or bearish, we’d like financial advisors to weigh in and report on the actual behavior of clients.  It’s two simple questions and will take no more than 20 seconds of your time. We’ll construct indicators from the data and report the results regularly on our blog–but we need your help to get a large statistical sample!

Click here to take Dorsey, Wright’s Client Sentiment Survey.

Contribute to the greater good!  It’s painless, we promise.

After the first 30 or so responses, the established pattern was simply magnified, so we are comfortable about the statistical validity of our sample. Most of the responses were from the U.S., but we also had multiple advisors respond from at least four other countries. Let’s get down to an analysis of the data! Note: You can click on any of the charts to enlarge them.

Question 1. Based on their behavior, are your clients currently more afraid of: a) getting caught in a stock market downdraft, or b) missing a stock market upturn?

Chart 1: Greatest Fear.  From survey to survey, the S&P 500 rallied +2.3%, and all of our client sentiment indicators responded positively.  The greatest fear number fell to its all-time lows, from 83% to 62%.  It’s hard to believe we’ve been running the survey for 2 whole years, and clients still have not even hit the high 50′s.  On the flip side, the opportunity group rose from 17% to 38%.

Chart 2. Greatest Fear Spread.  Another way to look at this data is to examine the spread between the two groups.  The spread fell to its all-time lows this round at 24%.

Question 2. Based on their behavior, how would you rate your clients’ current appetite for risk?

Chart 3: Average Risk Appetite.  The overall risk appetite number rose to just under its all-time highs which were set in April of 2011.  Close, but no cigar.  This round, we saw an average risk appetite of 3.02.  If the market continues to rally, so will the overall risk appetite number.

Chart 4: Risk Appetite Bell Curve. This chart uses a bell curve to break out the percentage of respondents at each risk appetite level.  The bell curve continues its recend trend towards more risk.  This round, over half of all respodents wanted a risk appetite of 3.

Chart 5: Risk Appetite Bell Curve by Group. The next three charts use cross-sectional data. This chart plots the reported client risk appetite separately for the fear of downdraft and for the fear of missing upturn groups.  This chart sorts out as expected, with the upturn group wanting more risk than the downturn group.

Chart 6: Average Risk Appetite by Group.  Historically, this is one of the most volatile indicators in the survey.  This round, the upturn group actually fell, while the dowturn group moved higher.  We’d expect both groups to move higher in a risingmarket, but the upturn group has been known to buck the trend.

Chart 7: Risk Appetite Spread.  This is a spread chart constructed from the data in Chart 6, where the average risk appetite of the downdraft group is subtracted from the average risk appetite of the missing upturn group.  The spread fell this round.

From survey to survey, the market was up +2.3%, and all the indicators performed as expected.  We’re now sitting at the lowest fear levels we’ve ever seen in the history of the survey.  The market has rallied roughly +23% from recent lows in September, and our sentiment indicators are responding to that information.  If the market continues to move higher, we will eventually hit par on the overall fear indicator (50-50 split), which might happen sooner than you expect.

No one can predict the future, as we all know, so instead of prognosticating, we will sit back and enjoy the ride. A rigorously tested, systematic investment process provides a great deal of comfort for clients during these types of fearful, highly uncertain market environments. Until next time, good trading and thank you for participating.

As you know, when individuals self-report, they are always taller and more beautiful than when outside observers report their perceptions!  Instead of asking individual investors to self-report whether they are bullish or bearish, we’d like financial advisors to weigh in and report on the actual behavior of clients.  It’s two simple questions and will take no more than 20 seconds of your time. We’ll construct indicators from the data and report the results regularly on our blog–but we need your help to get a large statistical sample!

Click here to take Dorsey, Wright’s Client Sentiment Survey.

Contribute to the greater good!  It’s painless, we promise.

After the first 30 or so responses, the established pattern was simply magnified, so we are comfortable about the statistical validity of our sample. Most of the responses were from the U.S., but we also had multiple advisors respond from at least four other countries. Let’s get down to an analysis of the data! Note: You can click on any of the charts to enlarge them.

Question 1. Based on their behavior, are your clients currently more afraid of: a) getting caught in a stock market downdraft, or b) missing a stock market upturn?

Chart 1: Greatest Fear.  From survey to survey, the S&P 500 was up by a small margin (+0.5%).  Despite the market basically treading water, client fear levels rose by a significant margin from 69% to 83%.  On the flip side, the opportunity group fell from 61% to 17%.  The S&P experienced a moderate pullback during the survey voting, which probably explains the sudden drop in client sentiment.

Chart 2. Greatest Fear Spread.  Another way to look at this data is to examine the spread between the two groups.  The spread jumped this round from 38% to 67%.

Question 2. Based on their behavior, how would you rate your clients’ current appetite for risk?

Chart 3: Average Risk Appetite.  The overall risk appetite number fell from 2.93 to 2.79.  Just as we saw with the overall fear numbers, client sentiment took a hit over the last 2 weeks.

Chart 4: Risk Appetite Bell Curve. This chart uses a bell curve to break out the percentage of respondents at each risk appetite level.  The bell curve continues its recend trend towards more risk.  The most common risk appetite requested was 3.

Chart 5: Risk Appetite Bell Curve by Group. The next three charts use cross-sectional data. This chart plots the reported client risk appetite separately for the fear of downdraft and for the fear of missing upturn groups.  This chart sorts out as expected, with the upturn group wanting more risk than the downturn group.

Chart 6: Average Risk Appetite by Group.  Historically, this is one of the most volatile indicators in the survey.  This round, both groups moved higher this round, which is not what we’d expect.  Keep in mind that the overall risk appetite number did fall.

Chart 7: Risk Appetite Spread.  This is a spread chart constructed from the data in Chart 6, where the average risk appetite of the downdraft group is subtracted from the average risk appetite of the missing upturn group.  The spread fell slightly this survey round.

From survey to survey, the market was up just a bit.  Client fear levels rose higher despite a “rising market.”  What the data points fail to point out is that the market experienced a sharp pullback during the week of voting, which accounts for the rise in fear levels.  Most of the other indicators followed the greatest fear’s lead, with clients wanting less exposure to risk in a shaky market.  Keep in mind that the stock market has been rallying for a few months now, as has client sentiment.  It might not hurt to take a little breather, as both client sentiment and the overall market continue to improve.

No one can predict the future, as we all know, so instead of prognosticating, we will sit back and enjoy the ride. A rigorously tested, systematic investment process provides a great deal of comfort for clients during these types of fearful, highly uncertain market environments. Until next time, good trading and thank you for participating.

As you know, when individuals self-report, they are always taller and more beautiful than when outside observers report their perceptions!  Instead of asking individual investors to self-report whether they are bullish or bearish, we’d like financial advisors to weigh in and report on the actual behavior of clients.  It’s two simple questions and will take no more than 20 seconds of your time. We’ll construct indicators from the data and report the results regularly on our blog–but we need your help to get a large statistical sample!

Click here to take Dorsey, Wright’s Client Sentiment Survey.

Contribute to the greater good!  It’s painless, we promise.

After the first 30 or so responses, the established pattern was simply magnified, so we are comfortable about the statistical validity of our sample. Most of the responses were from the U.S., but we also had multiple advisors respond from at least four other countries. Let’s get down to an analysis of the data! Note: You can click on any of the charts to enlarge them.

Question 1. Based on their behavior, are your clients currently more afraid of: a) getting caught in a stock market downdraft, or b) missing a stock market upturn?

Chart 1: Greatest Fear.  From survey to survey, the S&P 500 rose just over +1%.  Despite the moderate rally, client sentiment got worse this survey round, but not by much.  Overall client fear levels rose from 67% to 69%, while the missed opportunity group fell from 33% to 31%.  Despite a moderate pullback this week, it’s clear that client sentiment has improved significantly in the last three months with the market rally.

Chart 2. Greatest Fear Spread.  Another way to look at this data is to examine the spread between the two groups.  The spread jumped this round from 34% to 38%.

Question 2. Based on their behavior, how would you rate your clients’ current appetite for risk?

Chart 3: Average Risk Appetite.  The overall risk appetite number rose from 2.80 to 2.93.  Once again, I’d argue that the overall risk appetite number provides us with the best snapshot of client sentiment within this survey.

Chart 4: Risk Appetite Bell Curve. This chart uses a bell curve to break out the percentage of respondents at each risk appetite level.  The bell curve continues its recend trend towards more risk.  The most common risk appetite requested was 3.

Chart 5: Risk Appetite Bell Curve by Group. The next three charts use cross-sectional data. This chart plots the reported client risk appetite separately for the fear of downdraft and for the fear of missing upturn groups.  This chart sorts out as expected, with the upturn group wanting more risk than the downturn group.

Chart 6: Average Risk Appetite by Group.  Historically, this is one of the most volatile indicators in the survey.  This round, both groups moved higher with the market, which is what we’d expect to see in a rising market.

Chart 7: Risk Appetite Spread.  This is a spread chart constructed from the data in Chart 6, where the average risk appetite of the downdraft group is subtracted from the average risk appetite of the missing upturn group.  The spread fell slightly this survey round.

For this survey, the market rose just over +1% over two weeks, and the indicator responses were a mixed bag.  The overall fear numbers actually grew in the face of a rising market, which is not what we’d expect to see.  However, considering how much client sentiment has improved over the last few months, it’s not a stretch to see a slight pullback.  The overall risk appetite indicator continues to move higher with the market.  If the market rally can continue to gather steam, we should continue to see client sentiment improving into the future.

No one can predict the future, as we all know, so instead of prognosticating, we will sit back and enjoy the ride. A rigorously tested, systematic investment process provides a great deal of comfort for clients during these types of fearful, highly uncertain market environments. Until next time, good trading and thank you for participating.

As you know, when individuals self-report, they are always taller and more beautiful than when outside observers report their perceptions!  Instead of asking individual investors to self-report whether they are bullish or bearish, we’d like financial advisors to weigh in and report on the actual behavior of clients.  It’s two simple questions and will take no more than 20 seconds of your time. We’ll construct indicators from the data and report the results regularly on our blog–but we need your help to get a large statistical sample!

Click here to take Dorsey, Wright’s Client Sentiment Survey.

Contribute to the greater good!  It’s painless, we promise.

After the first 30 or so responses, the established pattern was simply magnified, so we are comfortable about the statistical validity of our sample. Most of the responses were from the U.S., but we also had multiple advisors respond from at least four other countries. Let’s get down to an analysis of the data! Note: You can click on any of the charts to enlarge them.

Question 1. Based on their behavior, are your clients currently more afraid of: a) getting caught in a stock market downdraft, or b) missing a stock market upturn?

Chart 1: Greatest Fear.  From survey to survey, the S&P 500 rose around +2.2%.  Overall client fear numbers continue to improve, with the fear of a downfall group falling from 81% to 67%.  On the other side, we saw the opportunity group rise from 19% to 33%.  The overall fear numbers are now sitting at their best levels we’ve seen since in just under one year.  If the market can continue to rally, we’ll probably continue to see an improvement in client sentiment levels.

Chart 2. Greatest Fear Spread.  Another way to look at this data is to examine the spread between the two groups.  The spread continues to fall, from 63% to 34% this round.

Question 2. Based on their behavior, how would you rate your clients’ current appetite for risk?

Chart 3: Average Risk Appetite.  The overall risk appetite number moved higher with the market, from 2.70 to 2.80.

Chart 4: Risk Appetite Bell Curve. This chart uses a bell curve to break out the percentage of respondents at each risk appetite level.  The bell curve continues its recend trend towards more risk.  The heaviest concentration remains in 2 and 3, but the risk appetite of 4 is creeping higher.

Chart 5: Risk Appetite Bell Curve by Group. The next three charts use cross-sectional data. This chart plots the reported client risk appetite separately for the fear of downdraft and for the fear of missing upturn groups.  This chart sorts out as expected, with the upturn group wanting more risk than the downturn group.

Chart 6: Average Risk Appetite by Group.  Here we have a bit of a mixed bag.  The upturn group’s risk average shot higher with the rising market, while the downturn group’s average fell.  Both groups went their “correct” way, with the upturn group wanting risk and the downturn group wanting safety.

Chart 7: Risk Appetite Spread.  This is a spread chart constructed from the data in Chart 6, where the average risk appetite of the downdraft group is subtracted from the average risk appetite of the missing upturn group.  The spread continues its recent trend of whipsawing (again).

This survey round, we saw the market rise a respectable +2.2% over two weeks, and most of our indicators respond as they should.  The greatest fear numbers hit the best levels we’ve seen in one year, with the downturn group at a respectable 67%.  The overall risk appetite number continues to click higher, in-line with a rising market.  Client sentiment levels have definitely been improving as the market rallies, and should continue to do so if the rally can hold on.

No one can predict the future, as we all know, so instead of prognosticating, we will sit back and enjoy the ride. A rigorously tested, systematic investment process provides a great deal of comfort for clients during these types of fearful, highly uncertain market environments. Until next time, good trading and thank you for participating.

As you know, when individuals self-report, they are always taller and more beautiful than when outside observers report their perceptions!  Instead of asking individual investors to self-report whether they are bullish or bearish, we’d like financial advisors to weigh in and report on the actual behavior of clients.  It’s two simple questions and will take no more than 20 seconds of your time. We’ll construct indicators from the data and report the results regularly on our blog–but we need your help to get a large statistical sample!

Click here to take Dorsey, Wright’s Client Sentiment Survey.

Contribute to the greater good!  It’s painless, we promise.

As you know, when individuals self-report, they are always taller and more beautiful than when outside observers report their perceptions!  Instead of asking individual investors to self-report whether they are bullish or bearish, we’d like financial advisors to weigh in and report on the actual behavior of clients.  It’s two simple questions and will take no more than 20 seconds of your time. We’ll construct indicators from the data and report the results regularly on our blog–but we need your help to get a large statistical sample!

Click here to take Dorsey, Wright’s Client Sentiment Survey.

Contribute to the greater good!  It’s painless, we promise.

As you know, when individuals self-report, they are always taller and more beautiful than when outside observers report their perceptions!  Instead of asking individual investors to self-report whether they are bullish or bearish, we’d like financial advisors to weigh in and report on the actual behavior of clients.  It’s two simple questions and will take no more than 20 seconds of your time. We’ll construct indicators from the data and report the results regularly on our blog–but we need your help to get a large statistical sample!

Click here to take Dorsey, Wright’s Client Sentiment Survey.

Contribute to the greater good!  It’s painless, we promise.

After the first 30 or so responses, the established pattern was simply magnified, so we are comfortable about the statistical validity of our sample. Most of the responses were from the U.S., but we also had multiple advisors respond from at least two other countries. Let’s get down to an analysis of the data! Note: You can click on any of the charts to enlarge them.

Question 1. Based on their behavior, are your clients currently more afraid of: a) getting caught in a stock market downdraft, or b) missing a stock market upturn?

Chart 1: Greatest Fear.  From survey to survey, the S&P fell -2.0%, and the overall fear number ticked higher as a result.  The fear number rose from 91% to 93%, while the opportunity group fell from 9% to 7%.

Chart 2. Greatest Fear Spread.  Another way to look at this data is to examine the spread between the two groups.  The spread rose this round, from 83% to 85%.

Question 2. Based on their behavior, how would you rate your clients’ current appetite for risk?

Chart 3: Average Risk Appetite.  Overall risk numbers fell in-line with the market, from 2.40 to 2.19.  This indicator has been whipsawing in-line with the market for the last few weeks.

Chart 4: Risk Appetite Bell Curve. This chart uses a bell curve to break out the percentage of respondents at each risk appetite level.  Over 95% of all respondents wanted a risk appetite of 3 or below.

Chart 5: Risk Appetite Bell Curve by Group. The next three charts use cross-sectional data. This chart plots the reported client risk appetite separately for the fear of downdraft and for the fear of missing upturn groups.  This bar chart sorts out as we expect, with the fear group looking for low risk and the opportunity group looking for more risk.  Keep in mind that with the light holiday response, there were only 4 total respondents in the upturn category (again).

Chart 6: Average Risk Appetite by Group.  Both groups’ risk appetite fell this round with the market.  The upturn group’s average could be considered “skewed” by the small number of responses.  Nevertheless, it’s significant to see the upturn group at the lowest levels since June of 2010.

Chart 7: Risk Appetite Spread.  This is a spread chart constructed from the data in Chart 6, where the average risk appetite of the downdraft group is subtracted from the average risk appetite of the missing upturn group.  The spread fell from all-time highs last round, to all-time lows this round.

This round, we saw a moderate decline in the market, and all of the sentiment indicators responded as they should.  The overall risk appetite number has continued to work perfectly, rising and falling in-line with market action.  Hopefully once the new year is underway, we’ll see an uptick in advisor participation.

No one can predict the future, as we all know, so instead of prognosticating, we will sit back and enjoy the ride. A rigorously tested, systematic investment process provides a great deal of comfort for clients during these types of fearful, highly uncertain market environments. Until next time, good trading and thank you for participating.