Bunker Mentality Persists

November 23, 2015

Insightful commentary from Ben Carlson about the lingering effects of the financial crisis:

We’re well into the seventh year of an economic and stock market recovery. The economic expansion hasn’t been as robust as many would like and the recovery has been uneven, as some have fared better than others in the aftermath of the worst economic contraction since the Great Depression. But you can’t deny that things are much better than they were during that fateful 2007-2009 period.

Click here to continue reading.

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Bespoke: What We Hear

March 13, 2014

So true…

bespoke

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Stock Market Sentiment Review

November 19, 2013

I’m still getting back into the swing of things after having the flu most of last week.  In the midst of my stock market reading, I was struck by an article over the weekend from Abnormal Returns, a blog you should be reading, if you aren’t already.  The editor had a selection of the blog posts that were most heavily trafficked from the prior week.  Without further ado:

  • Chilling signs of a market top.  (The Reformed Broker)
  • Ray Dalio thinks you shouldn’t bother trying to generate alpha.  (The Tell)
  • Ten laws of stock market bubbles.  (Doug Kass)
  • How to teach yourself to focus.  (The Kirk Report)
  • Are we in a bubble?  (Crossing Wall Street)
  • Josh Brown, “If the entities in control of trillions of dollars all want asset prices to be higher at the same time, what the hell else should you be positioning for?”  (The Reformed Broker)
  • Guess what stock has added the most points to the S&P 500 this year? (Businessweek)
  • Everything you need to know about stock market crashes.  (The Reformed Broker)
  • Jim O’Neil is swapping BRICs for MINTs.  (Bloomberg)
  • How to survive a market crash.  (Your Wealth Effect)

 

I count five of the top ten on the topic of market tops/bubbles/crashes!

Markets tend to top out when investors are feeling euphoric, not when they are tremendously concerned about the downside.  In my opinion, investors are still quite nervous—and fairly far from euphoric right now.

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Client Sentiment Survey – 8/9/13

August 9, 2013

Here we have the next round of the Dorsey, Wright Sentiment Survey, the first third-party sentiment poll.  Participate to learn more about our Dorsey, Wright Polo Shirt raffle! Just follow the instructions after taking the poll, and we’ll enter you in the contest.  Thanks to all our participants from last round.

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.

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Client Sentiment Survey – 7/26/13

July 26, 2013

Here we have the next round of the Dorsey, Wright Sentiment Survey, the first third-party sentiment poll.  Participate to learn more about our Dorsey, Wright Polo Shirt raffle! Just follow the instructions after taking the poll, and we’ll enter you in the contest.  Thanks to all our participants from last round.

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.

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Client Sentiment Survey Results – 6/21/13

July 1, 2013

Our latest sentiment survey was open from 6/21/13 to 6/28/13.  The Dorsey, Wright Polo Shirt Raffle continues to drive advisor participation, and we greatly appreciate your support!  This round, we had 64 advisors (same as last time! thanks!) participate in the survey. If you believe, as we do, that markets are driven by supply and demand, client behavior is important.  We’re not asking what you think of the market—since most of our blog readers are financial advisors, we’re asking instead about the behavior of your clients.  Then we’re aggregating responses exclusively for our readership.  Your privacy will not be compromised in any way.

After the first 30 or so responses, the established pattern was simply magnified, so we are fairly comfortable about the statistical validity of our sample. Some statistical uncertainty this round comes from the fact that we only had four investors say that thier clients are more afraid of missing a stock upturn than being caught in a downdraft. 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 market fell over -3%, and all of our indicators showed a decline in positive client sentiment.  The fear of decline group rose from 75% to 84%.  On the flip side, the fear of missing an upturn group fell from 25% to 16%.

Chart 2: Greatest Fear Spread. Another way to look at this data is to examine the spread between the two groups.  The spread moved higher again, from 49% to 68%.

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

Chart 3: Average Risk Appetite.  Average risk appetite fell with the market this round, from 2.90 to 2.71.

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, just under 50% of all respondents wanted a risk appetite of 3.

Chart 5: Risk Appetite Bell Curve by Group.  The next three charts use cross-sectional data.  The chart plots the reported client risk appetite separately for the fear of downdraft and for the fear of missing upturn groups.  We can see the upturn group wants more risk, while the fear of downturn group is looking for less risk.

Chart 6: Average Risk Appetite by Group.  This round, both groups’ risk appetite moved lower in a falling market.

Chart 7: Risk Appetite Spread.  This is a 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 to trade within its normal range.

The S&P 500 has experienced the dreaded summer doldrums, and client sentiment has responded in kind.  All of our indicators responded to the recent S&P drawdown as expected, with client fear levels rising and risk appetite falling.  Hopefully the summer can end a little bit more peacefully than it started.  The S&P is still up by a good measure for the year.

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.

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Client Sentiment Survey – 6/21/13

June 21, 2013

Here we have the next round of the Dorsey, Wright Sentiment Survey, the first third-party sentiment poll.  Participate to learn more about our Dorsey, Wright Polo Shirt raffle! Just follow the instructions after taking the poll, and we’ll enter you in the contest.  Thanks to all our participants from last round.

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.

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Client Sentiment Survey – 5/29/13

May 29, 2013

Here we have the next round of the Dorsey, Wright Sentiment Survey, the first third-party sentiment poll.  Participate to learn more about our Dorsey, Wright Polo Shirt raffle! Just follow the instructions after taking the poll, and we’ll enter you in the contest.  Thanks to all our participants from last round.

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.

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Client Sentiment Survey Results – 4/26/13

May 7, 2013

Our latest sentiment survey was open from 4/26/13 to 5/3/13.  The Dorsey, Wright Polo Shirt Raffle continues to drive advisor participation, and we greatly appreciate your support!  This round, we had 57 advisors (same as last time! thanks!) participate in the survey. If you believe, as we do, that markets are driven by supply and demand, client behavior is important.  We’re not asking what you think of the market—since most of our blog readers are financial advisors, we’re asking instead about the behavior of your clients.  Then we’re aggregating responses exclusively for our readership.  Your privacy will not be compromised in any way.

After the first 30 or so responses, the established pattern was simply magnified, so we are fairly comfortable about the statistical validity of our sample. Some statistical uncertainty this round comes from the fact that we only had four investors say that thier clients are more afraid of missing a stock upturn than being caught in a downdraft. 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 market was basically flat.  Our indicators were once again a mixed back.  The fear of downdraft group rose from 74% to 79%, while the upturn group fell from 26% to 21%.

Chart 2: Greatest Fear Spread. Another way to look at this data is to examine the spread between the two groups.  The spread moved higher again, from 47% to 58%.

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

Chart 3: Average Risk Appetite.  Average risk appetite bounced this round, from 2.85 to 3.05.  We’re sitting just off of all-time risk appetite highs.

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 50% of all respondents wanted a risk appetite of 3.

Chart 5: Risk appetite Bell Curve by Group.  The next three charts use cross-sectional data.  The chat plots the reported client risk appetite separately for the fear of downdraft and for the fear of missing upturn groups.  We can see the upturn group wants more risk, while the fear of downturn group is looking for less risk.

Chart 6: Average Risk Appetite by Group.  This round, both groups’ risk appetite moved higher in a flat market.

Chart 7: Risk Appetite Spread.  This is a 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 to trade within it’s normal range.

From survey to survey, the S&P was basically flat.  Client sentiment improved in some of our indicators, and fell in others.  Once again we see the overall risk appetite average acting as the most consistent indicator.  With client risk appetite near all-time survey highs, and the stock market currently hitting all-time highs, we hope to see those trends remain intact.

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.

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From the Archives: Psychology That Drives Bull Markets

May 2, 2013

The Leuthold Group’s Doug Ramsey on the psychology that drives bull markets:

Cashing in on bull markets is not a matter of waiting for everything to line up, anyway.  There must be a set of intellectually appealing bear arguments keeping some players on the sidelines…it is these same players who will eventually drive prices even higher when “new” and intellectually appealing bull arguments belatedly appear on the scene.  I have found that some of the best bull market action occurs when the “bull/bear” arguments superficially appear to be in relative balance, confounding many market players.  When the balance tips too heavily to one side or the other, the odds are that most of the related market move is already in the books.

—-this article originally appeared 3/3/2010.  Thinking about this paradox is one of the things that led us to start our own sentiment survey focusing on client investment behavior.  Even now, many years into the bull market, clients are still behaving fairly cautiously, indicating they do not yet fully believe the bull argument.

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Client Sentiment Survey 4/26/13

April 26, 2013

Here we have the next round of the Dorsey, Wright Sentiment Survey, the first third-party sentiment poll.  Participate to learn more about our Dorsey, Wright Polo Shirt raffle! Just follow the instructions after taking the poll, and we’ll enter you in the contest.  Thanks to all our participants from last round.

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.

Posted by:


Client Sentiment Survey Results – 4/12/13

April 23, 2013

Our latest sentiment survey was open from 4/12/13 to 4/19/13.  The Dorsey, Wright Polo Shirt Raffle continues to drive advisor participation, and we greatly appreciate your support!  This round, we had 57 advisors participate in the survey. If you believe, as we do, that markets are driven by supply and demand, client behavior is important.  We’re not asking what you think of the market—since most of our blog readers are financial advisors, we’re asking instead about the behavior of your clients.  Then we’re aggregating responses exclusively for our readership.  Your privacy will not be compromised in any way.

After the first 30 or so responses, the established pattern was simply magnified, so we are fairly comfortable about the statistical validity of our sample. Some statistical uncertainty this round comes from the fact that we only had four investors say that thier clients are more afraid of missing a stock upturn than being caught in a downdraft. 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 500 rose slightly, and none of our indicators worked correctly.  This has to do with when we publish the survey (Friday) and when most people take the survey (Monday).  On that Monday, the S&P had a big down day and these results incorporate that move down.  The fear of downturn group rose from 71% to 74%.  The fear of missing upturn group fell from 29% 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 42% to 47%.

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

Chart 3: Average Risk Appetite.  Average risk appetite dropped this round, from 3.08 to 2.85.

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 50% of all respondents wanted a risk appetite of 3.

Chart 5: Risk appetite Bell Curve by Group.  The next three charts use cross-sectional data.  The chat plots the reported client risk appetite separately for the fear of downdraft and for the fear of missing upturn groups.  We can see the upturn group wants more risk, while the fear of downturn group is looking for less risk.

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

Chart 7: Risk Appetite Spread.  This is a 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 dropped this round.

From survey to survey, the S&P rose slightly.  However, the market fell steeply when most of our respondents were taking the survey, as evidenced by a sharp pullback in client sentiment.  All of the indicators showed a marked decrease in client sentiment.  However, this is to be expected somewhat, considering how great the first quarter was.  Let’s hope for a small pullback and a continued rally into spring.

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.

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Client Sentiment Survey – 4/12/13

April 12, 2013

Here we have the next round of the Dorsey, Wright Sentiment Survey, the first third-party sentiment poll.  Participate to learn more about our Dorsey, Wright Polo Shirt raffle! Just follow the instructions after taking the poll, and we’ll enter you in the contest.  Thanks to all our participants from last round.

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.

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Waiting For Next Shoe To Drop

April 11, 2013

Bespoke points out that individual investors are  shockingly getting more bearish even as the U.S. stock market hits new-all time highs:

Sometimes you see an update to an indicator and the only thing you can do is scratch your head.  That is exactly what happened this morning when we saw the latest update to the weekly sentiment survey from the American Association of Individual Investors (AAII).  According to this week’s survey, bullish sentiment was nearly cut in half from 35.5% down to 19.3%!  As shown in the chart below, this represents the lowest reading of the entire bull market.  Outlier readings like this make us wonder whether or not there was an error with the release, but if true it is yet another example of how investors are still anything but all in.

aaii

There should be no question about how much damage was done to investor’s psychology during the financial crisis.  Four years into this bull market and investors still are waiting for the next shoe to drop.  I’m starting to think that sentiment this bad may fuel not just a cyclical bull market, but may be sufficient to power more of a secular bull market.

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Client Sentiment Survey Results – 3/22/13

April 1, 2013

Our latest sentiment survey was open from 3/22/13 to 3/29/13.  The Dorsey, Wright Polo Shirt Raffle continues to drive advisor participation, and we greatly appreciate your support!  This round, we had 72 advisors participate in the survey. If you believe, as we do, that markets are driven by supply and demand, client behavior is important.  We’re not asking what you think of the market—since most of our blog readers are financial advisors, we’re asking instead about the behavior of your clients.  Then we’re aggregating responses exclusively for our readership.  Your privacy will not be compromised in any way.

After the first 30 or so responses, the established pattern was simply magnified, so we are fairly comfortable about the statistical validity of our sample. Some statistical uncertainty this round comes from the fact that we only had four investors say that thier clients are more afraid of missing a stock upturn than being caught in a downdraft. 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 500 was flat, and our indicators were mixed.  The fear of downdraft group ticked up a point, from 70% to 71%.  The downdraft group fell from 30% to 29%.

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 41% to 42%.

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

Chart 3: Average Risk Appetite.  Average risk appetite jumped this round, from 2.95 to 3.08, matching the all-time survey highs for this indicator.

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, there’s been a noticeable shift towards 3.  Nearly half of all participants want a risk appetite of 3.

Chart 5: Risk appetite Bell Curve by Group.  The next three charts use cross-sectional data.  The chat plots the reported client risk appetite separately for the fear of downdraft and for the fear of missing upturn groups.  We can see the upturn group wants more risk, while the fear of downturn group is looking for less risk.

Chart 6: Average Risk Appetite by Group.  This round, the downturn group’s average rise, while the upturn group’s average fell slightly.

Chart 7: Risk Appetite Spread.  This is a 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 dropped this round.

From survey to survey, the S&P was basically flat.  The overall risk appetite number is sitting at all-time highs.  We can expect to see it break through if the market can continue to rally.  The first quarter was great for the stock market, so here’s hoping to more of the same.

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.

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“Least Loved Bull Market in Modern History”

March 29, 2013

USA Today assesses investor sentiment as the S&P 500 hits a new all-time high:

Normally, when the Standard & Poor’s 500-stock index hits a new all-time high and completes the third year of a bull market, you expect certain things.

You expect your Uncle Elmer to call you and tell you what a chump you are for not buying triple-leveraged biotechnology funds. You expect stadiums named after mutual fund companies. You expect to see your fund manager being carried in to TV appearances on a litter.

So far, however, the normal ebullience that accompanies a bull market has been hard to find, even in light of the S&P 500’s 10% gain in the first quarter of 2013.

This has been the least-loved bull market in modern history.

Which is exactly why it may continue.

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Client Sentiment Survey – 3/22/13

March 22, 2013

Here we have the next round of the Dorsey, Wright Sentiment Survey, the first third-party sentiment poll.  Participate to learn more about our Dorsey, Wright Polo Shirt raffle! Just follow the instructions after taking the poll, and we’ll enter you in the contest.  Thanks to all our participants from last round.

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.

Posted by:


Client Sentiment Survey Results – 3/8/13

March 19, 2013

Our latest sentiment survey was open from 3/8/13 to 3/15/13.  The Dorsey, Wright Polo Shirt Raffle continues to drive advisor participation, and we greatly appreciate your support!  This round, we had 65 advisors participate in the survey. If you believe, as we do, that markets are driven by supply and demand, client behavior is important.  We’re not asking what you think of the market—since most of our blog readers are financial advisors, we’re asking instead about the behavior of your clients.  Then we’re aggregating responses exclusively for our readership.  Your privacy will not be compromised in any way.

After the first 30 or so responses, the established pattern was simply magnified, so we are fairly comfortable about the statistical validity of our sample. Some statistical uncertainty this round comes from the fact that we only had four investors say that thier clients are more afraid of missing a stock upturn than being caught in a downdraft. 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 500 rose just over +2%, and our indicators responded with a mixed bag.  The fear of downturn group actually rose from 65% to 70% in a rising market, which we would not expect to see.  The upturn group fell from 35% to 30%.

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 29% to 41%.

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

Chart 3: Average Risk Appetite.  Average risk appetite jumped this round, from 2.76 to 2.95.  We’re sitting just off 1-year highs of client risk appetite at this point.  If the market continues to rally, this indicator should be able to break through 3.

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, nearly 75% of all respondents wanted a risk appetite of 3 or less.

Chart 5: Risk appetite Bell Curve by Group.  The next three charts use cross-sectional data.  The chat plots the reported client risk appetite separately for the fear of downdraft and for the fear of missing upturn groups.  We can see the upturn group wants more risk, while the fear of downturn group is looking for less risk.

Chart 6: Average Risk Appetite by Group.  This round, the downturn group’s average fell, while the upturn group’s average shot higher.  This continues to be our most volatile indicator.

Chart 7: Risk Appetite Spread.  This is a 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.

The S&P has now managed to rally nearly 10% for the year (as of this writing), and client sentiment has responded favorably.  Hopefully, we can see the stock market continue to rally into the second quarter, and clients become more comfortable with taking risk and investing in the market.

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.

Posted by:


Client Sentiment Survey – 3/8/13

March 8, 2013

Here we have the next round of the Dorsey, Wright Sentiment Survey, the first third-party sentiment poll.  Participate to learn more about our Dorsey, Wright Polo Shirt raffle! Just follow the instructions after taking the poll, and we’ll enter you in the contest.  Thanks to all our participants from last round.

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.

Posted by:


Client Sentiment Survey Results – 2/22/13

March 5, 2013

Our latest sentiment survey was open from 2/22/13 – 3/1/13.  The Dorsey, Wright Polo Shirt Raffle continues to drive advisor participation, and we greatly appreciate your support!  This round, we had 55 advisors participate in the survey. If you believe, as we do, that markets are driven by supply and demand, client behavior is important.  We’re not asking what you think of the market—since most of our blog readers are financial advisors, we’re asking instead about the behavior of your clients.  Then we’re aggregating responses exclusively for our readership.  Your privacy will not be compromised in any way.

After the first 30 or so responses, the established pattern was simply magnified, so we are fairly comfortable about the statistical validity of our sample. Some statistical uncertainty this round comes from the fact that we only had four investors say that thier clients are more afraid of missing a stock upturn than being caught in a downdraft. 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 500 rose about 0.5%, and our indicators responded with a mixed bag.  The fear of downturn group fell big this round, from 73% to 65%, while the upturn group rose from 27% to 35%.  This indicator is now showing the best client sentiment we’ve seen since March of 2012.

Chart 2: Greatest Fear Spread. Another way to look at this data is to examine the spread between the two groups.  The spread continued to fall, from 46% to 29%.

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

Chart 3: Average Risk Appetite.  Average risk appetite fell this round, which is not what we’d expect to see.  However, this indicator has been rising steadily with the market over the past few rounds, and it only fell by a small degree.  If the market continues to rally, watch for average risk to continue to climb.

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 75% of all respondents wanted a risk appetite of 3 or less.

Chart 5: Risk appetite Bell Curve by Group.  The next three charts use cross-sectional data.  The chat plots the reported client risk appetite separately for the fear of downdraft and for the fear of missing upturn groups.  We can see the upturn group wants more risk, while the fear of downturn group is looking for less risk.  This is our most volatile indicator, as usual.

Chart 6: Average Risk Appetite by Group.  This round, the downturn group’s average fell, while the upturn group’s average shot higher.

Chart 7: Risk Appetite Spread.  This is a 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.

The S&P has now rallied for nearly two-thirds of the first quarter, and client sentiment has responded favorably.  All of our indicators are showing broad improvement in client sentiment, save a slight mis-step here or there.  If the stock market can continue to move higher, there’s no question that clients will become more aggressive and more comfortable with adding risk.

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.

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Client Sentiment Survey – 2/22/13

February 22, 2013

Here we have the next round of the Dorsey, Wright Sentiment Survey, the first third-party sentiment poll.  Participate to learn more about our Dorsey, Wright Polo Shirt raffle! Just follow the instructions after taking the poll, and we’ll enter you in the contest.  Thanks to all our participants from last round.

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.

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Client Survey Results – 2/8/13

February 20, 2013

Our latest sentiment survey was open from 2/8/13 – 2/15/13.  The Dorsey, Wright Polo Shirt Raffle continues to drive advisor participation, and we greatly appreciate your support!  This round, we had 70 advisors participate in the survey. If you believe, as we do, that markets are driven by supply and demand, client behavior is important.  We’re not asking what you think of the market—since most of our blog readers are financial advisors, we’re asking instead about the behavior of your clients.  Then we’re aggregating responses exclusively for our readership.  Your privacy will not be compromised in any way.

After the first 30 or so responses, the established pattern was simply magnified, so we are fairly comfortable about the statistical validity of our sample. Some statistical uncertainty this round comes from the fact that we only had four investors say that thier clients are more afraid of missing a stock upturn than being caught in a downdraft. 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 500 rose around +1.5%, and our indicators responded as expected.  The fear of downdraft group fell from 75% to 73%, while the upturn group rose from 25% to 27%.  The market is continuing to rally well into the first quarter.

Chart 2: Greatest Fear Spread. Another way to look at this data is to examine the spread between the two groups.  The spread nudged lower , from 49% to 46%.

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

Chart 3: Average Risk Appetite.  Average risk remained the same, from 2.825 to 2.821.

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, just under 85% of all respondents wanted a risk appetite of 3 or less.

Chart 5: Risk appetite Bell Curve by Group.  The next three charts use cross-sectional data.  The chat plots the reported client risk appetite separately for the fear of downdraft and for the fear of missing upturn groups.  We can see the upturn group wants more risk, while the fear of downturn group is looking for less risk.

Chart 6: Average Risk Appetite by Group.  This round, the downturn group’s average fell, while the upturn group’s average shot higher.

Chart 7: Risk Appetite Spread.  This is a 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.

The S&P has now rallied for just over half the length of the first quarter, and client sentiment has responded favorably.  All of our indicators are showing broad improvement in client sentiment.  If the stock market can continue to move higher, there’s no question that clients will become more aggressive and more comfortable with adding risk.

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.

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Client Sentiment Survey – 2/8/13

February 8, 2013

Here we have the next round of the Dorsey, Wright Sentiment Survey, the first third-party sentiment poll.  Participate to learn more about our Dorsey, Wright Polo Shirt raffle! Just follow the instructions after taking the poll, and we’ll enter you in the contest.  Thanks to all our participants from last round.

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.

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Client Survey Results – 1/18/13

January 29, 2013

Our latest sentiment survey was open from 1/18/13 – 1/25/13.  The Dorsey, Wright Polo Shirt Raffle continues to drive advisor participation, and we greatly appreciate your support!  This round, we had 63 advisors participate in the survey. If you believe, as we do, that markets are driven by supply and demand, client behavior is important.  We’re not asking what you think of the market—since most of our blog readers are financial advisors, we’re asking instead about the behavior of your clients.  Then we’re aggregating responses exclusively for our readership.  Your privacy will not be compromised in any way.

After the first 30 or so responses, the established pattern was simply magnified, so we are fairly comfortable about the statistical validity of our sample. Some statistical uncertainty this round comes from the fact that we only had four investors say that thier clients are more afraid of missing a stock upturn than being caught in a downdraft. 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 (it’s been just over 1 month), the S&P 500 rose nearly +5%, and our indicators responded as expected.  The fear of downdraft group fell from 83% to 75%, while the upturn group rose from 17% to 25%.  The market is off to a strong start this year, and client sentiment is showing strong signs of improvement after a lackluster end of 2012.

Chart 2: Greatest Fear Spread. Another way to look at this data is to examine the spread between the two groups.  The spread dropped by a large margin, down from 65% to 49%.

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

Chart 3: Average Risk Appetite.  Average risk moved strongly upwards, from 2.54 to 2.83.

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 85% of all respondents wanted a risk appetite of 3 or less.

Chart 5: Risk appetite Bell Curve by Group.  The next three charts use cross-sectional data.  The chat plots the reported client risk appetite separately for the fear of downdraft and for the fear of missing upturn groups.  We can see the upturn group wants more risk, while the fear of downturn group is looking for less risk.

Chart 6: Average Risk Appetite by Group.  This round, the upturn group’s risk appetite average fell, while the downturn group’s rose.

Chart 7: Risk Appetite Spread.  This is a 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.

The S&P shot out of the gate for 2013, and client sentiment responded favorably.  The fear of losing money in the market percentage declined to 75%.  Average risk appetite climbed steadily with the market.  If the stock market can manage to put together a rally over the first six months of the year, we definitely have a chance at seeing some of the best client sentiment in the history of this survey.

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.

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Client Sentiment Survey – 1/18/13

January 18, 2013

Here we have the next round of the Dorsey, Wright Sentiment Survey, the first third-party sentiment poll.  Participate to learn more about our Dorsey, Wright Polo Shirt raffle! Just follow the instructions after taking the poll, and we’ll enter you in the contest.  Thanks to all our participants from last round.

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.

Posted by: