SPX holding strong, investor positioning, bullish sentiment(?), average retirement balances, and never giving up
SPX holding strong, investor positioning, bullish sentiment(?), average retirement balances, and never giving up
The Sandbox Daily (2.23.2023)
Welcome, Sandbox friends.
Today’s Daily discusses the S&P 500 staying strong above the 200-day moving average during bear markets, the NAAIM Exposure Index shows weaker positioning following strong January, a goodbye to that brief bullish sentiment, the average 401(k) and IRA account balance at Fidelity, and honoring progress in our own lifecycles.
Let’s dig in.
Markets in review
EQUITIES: Nasdaq 100 +0.94% | Russell 2000 +0.71% | S&P 500 +0.53% | Dow +0.33%
FIXED INCOME: Barclays Agg Bond +0.36% | High Yield +0.99% | 2yr UST 4.702% | 10yr UST 3.887%
COMMODITIES: Brent Crude +2.31% to $82.46/barrel. Gold -0.63% to $1,829.9/oz.
BITCOIN: +0.71% to $23,953
US DOLLAR INDEX: +0.03% to 104.612
CBOE EQUITY PUT/CALL RATIO: 0.80
VIX: -5.16% to 21.14
Quote of the day
“Asset prices trend while volatility mean reverts. And humans behave as if it’s the opposite.”
-J.C. Parets
S&P 500 staying strong (barely) above the 200-day moving average
The S&P 500 closed today at 4012.32, above its 200-day moving average for the 23rd session in a row.
Last week, Anthony Scaramucci – the founder of SkyBridge Capital, Bitcoin maximalist, and White House Communications Director under President Trump for a whopping 10 whole days – revealed he was a “closet technician” (h/t The Chart Report) when he stated at the time (2/15) that no prior S&P 500 bear market in history made a new low after spending 18 consecutive closes above its 200-day moving average.
Of the 11 prior instances since 1950, the S&P 500 has never been lower 3, 6, or 12 months later. In fact, the median return is quite encouraging across these three time horizons.
Source: Anthony “The Mooch” Scaramucci, SkyBridge Capital, The Chart Report, SentimenTrader
NAAIM Exposure Index shows weaker positioning following strong January
The National Association of Active Investment Managers (NAAIM) Exposure Index is down to 57 from the recent peak of 85 two weeks ago.
The NAAIM report shows the collective professional money manager’s weekly average exposure to equities (scaled from -200% which is leveraged short to +200% which is fully levered long). The index has started to roll over since the end of January, indicating active investment fund managers are shedding risk and/or adding downside protection.
Meaningful rate repricing over the last few weeks remains a significant headwind for equities. Earnings risk, recession signaling from deeply inverted yield curve, dampened sentiment (see below), and valuation are some of the other go-to bearish talking points. Worries about a Fed policy mistake as the FOMC committee continues to cite more lagging indicators also flagged as a concern.
Nothing like price to change sentiment.
Source: National Association of Active Investment Managers
Bullish sentiment, that didn’t last long
More bears than bulls, according to the latest survey from the American Association of Individual Investors (AAII).
After just two short weeks of bullish sentiment being above bearish sentiment, retail investors are back to being more pessimistic about their market outlook. The AAII reported bullish sentiment had dropped 12.5% down to 21.6% in the latest survey. This was the second consecutive decline and is the lowest level of bullish sentiment since the first week of January. Bearish sentiment moved up to 38.6% from 28.8% in the prior week.
Still, the slight majority goes to investors who have a neutral market outlook, with neutral sentiment rising to 39.8% from 37.1%, the highest since last March.
Again, nothing like price to change sentiment.
Source: Canaccord Genuity, American Association of Individual Investors
One scary graphic
The future American may be in trouble.
Although 2022 market performance drove these balances down south, the numbers are concerning nonetheless.
The average 401(k) account and individual retirement account (IRA) balance is ~$104,000. This according to a new report by Fidelity Investments, the nation’s largest provider of 401(k) plans.
These balances are up from the same quarter 10 years ago, but the numbers still suggest that a greater priority must be placed on moderating/deferring current consumption habits so that people properly save for their future self in retirement.
It should also be noted that these are averages across a wide swath of ages and demographics – so one must be careful in drawing conclusions here.
“Given all the stresses in the world today, such as natural disasters and geo-political events, Americans continue to confront challenging times in our economy,” Kevin Barry, president of workplace investing at Fidelity, said in a statement Thursday.
One simple graphic
On day one, people are generally bad at everything they try.
But with some patience, grit, and humility, we all get better.
One day at a time…
Source: Brian Feroldi
That’s all for today.
Blake
Welcome to The Sandbox Daily, a daily curation of relevant research at the intersection of markets, economics, and lifestyle. We are committed to delivering high-quality and timely content to help investors make sense of capital markets.
Blake Millard is the Director of Investments at Sandbox Financial Partners, a Registered Investment Advisor. All opinions expressed here are solely his opinion and do not express or reflect the opinion of Sandbox Financial Partners. This Substack channel is for informational purposes only and should not be construed as investment advice. Clients of Sandbox Financial Partners may maintain positions in the markets, indexes, corporations, and/or securities discussed within The Sandbox Daily.