The longest bearish streak amongst retail investors in 30 years.

Each week, (for over 30 years) the American Association of Individual Investors conducts a simple survey amongst their members, asking if they are Bullish, Bearish or Neutral about the stockmarket over the next 6 months.

The pre-cursor article to this post can be found here.

I’ll argue that in moments of crisis or shock, the majority of respondents in such surveys are often on the wrong side of the market. In other words, when retail investors are “losing their heads”, they tend to take the opposite stance to the facts and then don’t change their mind until sentiment reaches the other end of the pendulum.

Today, this survey is experiencing its longest unbroken sentiment where bears have outnumbered the bulls, since July 1990. Back then, the bearish majority survey trend lasted 30 weeks (until February 1991) during which the S&P 500 rose approx. 15%.

The current bearish majority has been in force for 31 weeks (since the last day of February 2020) and the S&P has risen 40%.

Last week’s survey is the narrowest we have seen the bulls to becoming the majority in the weekly poll.

So, after a 40% return, we may start seeing more of the individual investors in the AAII Sentiment Survey, becoming bullish, than bearish.

Have a think about that for a moment.

October 12, 2020
by Rob Zdravevski
rob@karriasset.com.au

Illustrating De-equitisation

In August 2020, there were 1,891 * companies listed on the Australian Stock Exchange (ASX), the lowest amount since May 2007.

Which is 7% less from the 2,026 record high of February 2018.

This figure would be drastically lower if we exclude over 200 ETF’s and 100 Listed Investment Companies (LIC’s).

And what if we consider the 1,324 listed entities (61% of the total*) with markets caps below $100 million ?

One-third (733) of the companies have market capitalisations below $25 million)

Incidentally, the lowest amount of companies listed over the past 18 years was 1,341 companies which was in March 2002, which is when my data ends.

The de-equitisation story is intact and made acute when an enormous amount of money is chasing fewer opportunities.

And Australia has the world’s 4th largest pension system with $2.1 trillion in savings.

Albeit, fiduciaries and managers in the superannuation world do allocate them globally, home currency bias and local currency obligations does favour a steady flow towards the ASX.

* there are 2,167 listed entities in total which includes foreign equity issuers including those comprising a stapled group along with wholesale & retail debt issuers.

October 9, 2020
by Rob Zdravevski
rob@karriasset.com.au

A good bounce for now

In the linked post below, I signalled that my various equity index targets were reached.

For the ASX 200, I was calling a retracement to 5,803. On that day (September 22, 2020) it traded to 5,763.

12 days onwards, the ASX 200 has risen 5% and it’s now trading at nearly 3 standard deviations above its daily mean.

It’s not a time to add to holdings today.

Be patient !

https://lnkd.in/gNr52Qv

October 8, 2020
by Rob Zdravevski
rob@karriasset.com.au