Systematic Relative Strength

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.

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 rose around +2.4%. The overall fear number fell from 93% to 91%, off their recent highs. On the flip side, the opportunity group rose from 7% to 9%. Client sentiment seems like it will remain stuck in the mud for the remainder of the year.

Chart 2. Greatest Fear Spread. Another way to look at this data is to examine the spread between the two groups. The spread fell this round, from 87% to 83%.

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

Chart 3: Average Risk Appetite. Overall risk numbers snapped back this round, from 2.08 to 2.40. We saw a much sharper move in this indicator to add risk, compared with the overall fear numbers.

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 90% of all respondents were either 3 or below. We are seeing very low appetite for risk across the board.

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 rose this round by a significant margin. The upturn group, in particular, hit all-time highs, but keep in mind there were only 4 respondents in that group.

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 jumped to all-time highs this round, due to the upturn’s group move higher.

This survey, we saw a respectable market rally over two weeks, and most of our indicators responded as they should have. The greatest fear number dipped by a small margin, while the overall risk appetite numbers jumped by a large margin. We have had anemic response rates during the holiday, which is to be expected. Hopefully things will pick up when the new year arrives.

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 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 -3.0%, and client fear levels responded in-kind. The overall fear number rose from 88% to 93%; the greatest fear numbers are now the highest we’ve seen since mid-June. On the flip side, the opportunity group fell from 12% to 7%. Client sentiment remains terrible.

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 77% to 87%.

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

Chart 3: Average Risk Appetite. Overall risk numbers plummeted this round, from 2.44 to 2.08. Overall risk appetite is now the lowest we’ve seen since September of 2010.

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 50% of all respondents want a risk appetite of either 1 or 2.

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.

Chart 6: Average Risk Appetite by Group. Both groups’ risk appetite fell, just like the overall risk number.

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 jumped by a small degree this round.

This survey, we saw the market dip lower, and both client fear levels and overall risk appetite respond as expected. The overall risk appetite number paints an ugly picture — client sentiment is now the worst it’s been since September of 2010. While that’s never a good thing, some studies have shown that when client sentiment reaches these types of overextended low levels, the stock market does well going foward.

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.

PS - This is the last chance to enter the drawing for a Dorsey Wright Polo Shirt this quarter. Good luck!

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 rose just over +1%, and client fear levels rose slightly. Client fear levels rose from 87% to 88% despite a minor bounce in the market. On the flip side, we see that the opportunity group dropped from 13% to 12%. Normally, we’d expect to see a market bounce lead to a drop in fear levels. You’ll remember that last round, the overall fear numbers remained flat, despite a +7% move in two weeks. Client sentiment remains in the pits.

Chart 2. Greatest Fear Spread. Another way to look at this data is to examine the spread between the two groups. As with the overall fear numbers, the spread remained mostly stable, rising from 74% to 77%.

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

Chart 3: Average Risk Appetite. Overall risk appetite numbers nudged higher this round, from 2.42 to 2.44. In contrast with the overall fear numbers, the average risk appetite data continues to perform as expected. Check out how the overall risk appetite average mirrors the market movement.

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 80% of all respondents were looking for a risk appetite of either 2 or 3 (just like last time).

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.

Chart 6: Average Risk Appetite by Group. The fear group is looking for more risk here, while the opportunity group’s average did not move.

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 round.

This survey, we saw a relatively minor market rally, and small moves in both the overall fear numbers and the average risk appetite. The overall fear numbers actually got worse this round, despite a rally. On the other hand, the risk appetite average number nudged higher, in line with the market. The overall risk appetite number remains the king of all indicators, performing as expected nearly every survey round. On the whole, client sentiment is still very, very bad, especially when considering the S&P has rallied nearly 10% in less than two months.

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 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 rose around +7%, and client fear levels remained almost exactly the same (87% for the fear group and 13% for the opportunity group). Normally we would expect to see a significant drop in client fear levels, but that didn’t happen this week. Clients, on the whole, are wary of the stock market.

Chart 2. Greatest Fear Spread. Another way to look at this data is to examine the spread between the two groups. As with the overall fear numbers, the spread remained stable at 74%.

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

Chart 3: Average Risk Appetite. Overall risk appetite numbers continued to rise this round, up to 2.42 from 2.32. The overall risk appetite numbers have risen over the last few weeks, in line with the overall stock 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. Over 80% of all respondents were looking for a risk appetite of either 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 bar chart sorts out as we expect, with the fear group looking for low risk and the opportunity group looking for more risk.

Chart 6: Average Risk Appetite by Group. Both camps’ risk appetite rose this round with the market, for the second straight survey.

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 nudged higher this round.

This survey, we saw a huge market rally, and a muted move in client sentiment. The overall fear numbers actually stayed the same when rounded to the nearest whole number. Perhaps clients are looking for a more consistent rally than what we’ve seen so far before client sentiment turns around. As of the writing of this report, it turns out that clients may have been right to stay on the sidelines to wait for a little bit more confirmation. Once again, the overall risk appetite numbers remain the most faithful to what we understand client sentiment to be. As the market rises, clients want more risk, and as the market falls, clients want less 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.

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 rose around +1.7%, and client fear levels responded as expected. Client fear levels dropped from 92% to 87%, while the opportunity camp rose from 8% to 13%. Despite the minor bounce, 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 fell from 84% to 74% this round.

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

Chart 3: Average Risk Appetite. Overall risk appetite numbers rose this round, as they should in a rising market. This survey the overall risk appetite average was 2.32, up from 2.10 from last time. The overall numbers are still hovering around all-time survey lows.

Chart 4: Risk Appetite Bell Curve. This chart uses a bell curve to break out the percentage of respondents at each risk appetite level. Once again, over half the respondents answered 2, and nearly a third answered 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 bar chart sorts out as we expect, with the fear group looking for low risk and the opportunity group looking for more risk.

Chart 6: Average Risk Appetite by Group. Both camps’ risk appetite rose this round with the market. Nothing much to see here.

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 nudged lower this round.

This survey, we saw a moderate rally in the market over two weeks, and all of our client sentiment indicators responded as they “should have.” The overall fear levels fell, and the overal risk appetite numbers rose. Everything performed as expected, which is nice to see.

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 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 around -1.5%, and client fear levels nudged only slightly higher after a major move last round. This round, client fear levels rose from 91% to 92%, while the opportunity group fell from 9% to 8%. Client sentiment remains in the pits as the stock market continues to suffer the effects from an overall dreadful summer.

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 82% to 84% this round.

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

Chart 3: Average Risk Appetite. Overall risk appetite numbers fell by a large margin this round, from 2.28 to 2.10. These overall risk appetite numbers are the lowest we’ve seen since September of 2010. All in all, it’s been a rough few weeks for client sentiment for both of our major indicators.

Chart 4: Risk Appetite Bell Curve. This chart uses a bell curve to break out the percentage of respondents at each risk appetite level. With overall risk appetite in the gutter, it’s no wonder that we see the majority of respondents (around 70% of all respondents) looking for either 1 or 2.

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.

Chart 6: Average Risk Appetite by Group. Both camps’ risk appetite fell this round, and dramatically so. The fear camp’s risk appetite is at the lowest we’ve seen since August of 2010. The more volatile opportunity group’s average dropped dramatically, after a contrarian move up last survey.

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 after hitting all-time highs last survey.

This survey, we saw the overall fear number tick higher in the face of a falling market. The overall risk appetite number is now sitting at 1-year lows after a horrible summer for the stock market. The stock market is now down 20% from recent highs, client sentiment is near 1-year lows, and the overall risk appetite numbers are terrible. The only silver lining to this situation is that historically, clients have been terrible predictors of future stock market performance. So when we see client sentiment at these levels, it could mean a rally is around the corner (we hope!).

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 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 around (-1.8%), and client fear levels spiked in a big way. This round, client fear levels jumped to 91% from 78%, while the opportunity group fell from 22% to 9%. What’s interesting to note here is that it took a few extra weeks after the major market move before we saw the big spike in fear levels. It might be that clients were away on vacation for the summer, and now that school is back in session, everyone is taking a hard look at the overall stock market and where they want to be positioned. Whatever it is, sentiment levels are not pretty right now.

Chart 2. Greatest Fear Spread. Another way to look at this data is to examine the spread between the two groups. The spread jumped by a large margin, from 55% to 82%.

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

Chart 3: Average Risk Appetite. Overall risk appetite numbers fell in-line with the market, but not to the same degree as the overall fear numbers. The average risk appetite fell from 2.43 to 2.28 this round.

Chart 4: Risk Appetite Bell Curve. This chart uses a bell curve to break out the percentage of respondents at each risk appetite level. Low risk continues to dominate client sentiment, with over half of all respondents wanting a risk appetite of 2.

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.

Chart 6: Average Risk Appetite by Group. Here we see the opportunity group acting up again, like they are prone to do. The opportunity group’s risk appetite bounced higher this round, while the fear group’s risk appetite moved slightly lower.

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 reached new all-time highs this round, as the two camps’ appetites moved in opposite directions.

This survey round, the overall fear numbers hit their highest levels since the market started to move lower at the beginning of the summer. What’s interesting is the month or so time-lag it took for fear levels to jump after the market’s terrible summer. Are people just coming back from vacation to see what’s been going on? Or is this a deeper shift in client sentiment? As usual, the overall risk appetite numbers moved in-sync with 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.

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 three 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 was basically flat, and the fear numbers remained mostly the same. Fear levels dropped from 79% to to 78%, while opportunity levels rose from 21% to 22%. After an ugly summer, it seems as though clients are in a “wait and see” mode with regards to sentiment.

Chart 2. Greatest Fear Spread. Another way to look at this data is to examine the spread between the two groups. The spread fell slightly, from 58% to 55%.

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

Chart 3: Average Risk Appetite. Overall risk appetite numbers reflected the same data as the overall fear numbers, with a very quiet move lower. This round, the overall risk number fell from 2.49 to 2.44.

Chart 4: Risk Appetite Bell Curve. This chart uses a bell curve to break out the percentage of respondents at each risk appetite level. Low risk continues to dominate client sentiment, with nearly half of all respondents looking for a risk level of 2.

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.

Chart 6: Average Risk Appetite by Group. Both camps’ risk averages fell slightly this round, as the overall fear numbers show. Nothing to really see here, move along!

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 dipped slightly this round, but still sits above its major range over the past year.

This survey round, fear levels continued to move lower on muted market action, and the other sentiment indicators pretty much fell into line. Like the overall fear numbers, the risk appetite average ticked slightly lower. Despite a major drawdown over the past two months, client sentiment seems to have found itself sitting in the mid 70′s for the time being.

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 three 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 -8.8%, and fear levels actually dropped. This week, the survey results went completely opposite of what we would expect to happen. Fear levels dropped from 88% to 79% survey to survey. On the flip side, the missed opportunity camp rose from 12% 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 fell this round from 76% to 58%.

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

Chart 3: Average Risk Appetite. Same as the overall fear numbers, average client sentiment actually rose in the face of a market meltdown. We have no explanation for why this happened! Average risk appetite rose from 2.31 to 2.49.

Chart 4: Risk Appetite Bell Curve. This chart uses a bell curve to break out the percentage of respondents at each risk appetite level. Low risk appetite dominated this round, with the majority of respondents answering 2 and 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 also sorts out pretty much as expected, with the fear group wanting less risk and the opportunity group wanting more. Neither camp seems to be able to stomach a risk appetite of 5 yet.

Chart 6: Average Risk Appetite by Group. In line with the other indicators from this report, the average risk appetite by group bucked the hypothesis, as both groups wanted to add more risk.

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 continued its move higher this round.

What a doozy! We saw major market action over this survey period, and our indicators did not perform as we expected. With the market down a whopping -8% from survey to survey, we were expecting fear levels to hit all-time highs. Instead, fear levels actually dropped by a significant amount. The overall risk appetite average reflected the same thing. In the face of a major market meltdown, clients were looking to add risk and get in the market! Is this a sign that clients have turned the page…that clients have finally learned their lesson? Is this the beginning of a new era of emotional asset allocation? I’ll bet “No,” but only time can tell!

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 three 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 -1.8%, and we saw the spike in fear levels we expected from the week before. Client fear levels went from 78% to 88%, while opportunity levels dropped from 22% to 12%. In light of today’s (8/8/11) market action, I wouldn’t be surprised if we hit new all-time fear level highs during the next survey.

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 56% to 76%.

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 from 2.42 to 2.31. We’ve noticed the overall average risk numbers seem to have the best handle on the relationship between client sentiment and market action. Here, we see falling risk appetite in light of falling market action, exactly as we would expect.

Chart 4: Risk Appetite Bell Curve. This chart uses a bell curve to break out the percentage of respondents at each risk appetite level. Low risk appetite dominated this round, with more 1′s than we’ve seen in months.

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 also sorts out pretty much as expected, with the fear group wanting less risk and the opportunity group wanting more. There was only one response of 5, which came from the fear camp (troll or mis-click).

Chart 6: Average Risk Appetite by Group. We had a standard move in both camps this week with regards to market action. The fear group loaded up on low risk, while the opportunity group’s average fell just slightly.

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 shot to the highest levels in over a year, as the fear group’s average plunged.

This survey round everything went exactly as expected. The stock market continued to fall, fear levels rose and average risk appetites dropped. It was as cookie-cutter as it gets, which is always nice when testing live feedback vs. hypotheses. As I mentioned earlier, I would expect to see fear levels to be at or near their all-time highs in the upcoming survey based on the market action of the last week.

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.