AAII Sentiment Survey, 4/5/23

yogibearbull

For the week ending on 4/5/23, bearish remained the top sentiment (35.0%; above average) & neutral became the bottom sentiment (31.6%; average); bullish became the middle sentiment (33.3%; below average); Bull-Bear Spread was -1.7% (below average). Investor concerns: Inflation (moderating but high); economy; the Fed; dollar; cryptos; market volatility (VIX, VXN, MOVE); Russia-Ukraine war (58+ weeks, 2/24/22- ); geopolitical. For the Survey week (Th-Wed), stocks were up, bonds up, oil up strongly (OPEC cut production), gold up, dollar down. A huge improvement in the Sentiment this week, possibly a trend change? #AAII #Sentiment #Markets
https://ybbpersonalfinance.proboards.com/thread/141/aaii-sentiment-survey-weekly?page=9&scrollTo=1002

hank

As they say it’s “a market of stocks” rather than a “stock market”. Always opportunity somewhere if you can find it. There’s an important jobs report out tomorrow which is Good Friday. The stock market will be closed so traders will need to wait until Monday to react. May account for some of the turbulence today. Gold finally broke through the $2,000 barrier on the upside but has backtracked today. Silver, of course, has been hotter - but has a reputation for higher volatility.

The major market indexes (ie “the market”) have really confounded a lot of prognosticators I follow. Few foresaw the nice advance in the major indexes since the first of the year. I pulled in my risk exposure slightly last week (as mentioned in the BS thread). But would add to equities after any significant sell off. Bonds don’t excite me with the 10-year under 3.5%. However, if we get into a really serious recession rates will likely decline even further.

Added: From a recent issue of the F/T: “Retail trading reached record levels earlier this year, accounting for almost a quarter of all market activity on some days in late January according to JPMorgan analysts.”

MikeM

Gold finally broke through the $2,000 barrier on the upside but has backtracked today.

Yes, a good time to add a bit more IAU? I think so.

hank

MikeM said:

Yes, a good time to add a bit more IAU? I think so.

@MikeM - I can’t comment on that. I know you’ve held some precious metals and nearly asked you in another thread if you’d made any money on them.

They can be fun and exciting, but can also plunge rapidly and unexpectedly. If you add in my indirect exposure through PRPFX - plus some more concentrated holdings - I’d say I’m in the 5-6% 7-9% (of portfolio) range on precious metals / miners, plus have another 1-2% invested in a predominately industrial metals miner. You’ll find strong gold bulls and strong gold bears among the pundits. So, I don’t have any strong opinion.

My guess is that like every other market that has already advanced retail investors will start throwing money at the precious metals. Then, after a bubble forms those markets will fall precipitously. Last in will get hurt the most. Albeit, we’re still in the early stages.

yogibearbull

Both gold-miners (majors GDX, majors/minors GDXJ) and gold bullion (GLD, lower ER IAU) peaked in July 2020; another attempt was in early-2022.
Now, gold is approaching those highs, but gold-miners are still far from those highs. Chart shows GDX and GLD (bottom panel) for 1-yr (default) - can change timeframes.
https://stockcharts.com/h-sc/ui?s=GDX&p=D&yr=1&mn=0&dy=0&id=p53247840045

MikeM

Hi @hank. I took a position in IAU back in the covid days and I have actually made some money on the gold ETF. But, like you with your permanent portfolio and miners, I keep the percentage at a conservative place. I was only at ~3% at start of this year but have increased to 6% over the last few months and I do plan to go a little higher. Of course if you are going to buy one thing you have to sell something else. I've been selling the alternative fund REMIX as I buy gold. That I did not make money on.

hank

@yogibearbull -

I don’t dispute your historical data on gold or gold miners. (Silver actually peaked sometime in the 70s at double where it is today.) However, in the context of the broader markets, gold’s surge in 2020 wasn’t as remarkable / noteworthy as today, The prior year, 2019, the S&P 500 had risen 29%. And in 2020 it gained another 16%. As your investor sentiment on the stock market shows predominately bearish sentiment today, it might be enlightening to look at sentiment numbers during 2020. Suspect they were higher.

So I believe gold’s advance back then was somewhat overshadowed by the big gains in equities and bullish sentiment among investors. That is far from the case today following a series of rapid Fed rate hikes coupled with a poor prior year (2022) for both stocks and bonds.

hank

MikeM said:

Of course if you are going to buy one thing you have to sell something else. I've been selling the alternative fund REMIX as I buy gold. That I did not make money on.

I’ll have to look at REMIX some time. Your point rings true. A month ago I “bought down” over a period of days into a stock that looked attractive - until it stopped falling. As a consequence I decided to sell one of my long time favorites and have been kicking myself. There were other reasons for the move, including not wanting to be overweight any one sector. Probably the right decision longer term. Still, it hurts when the one you sold keeps rising.

MikeM

@hank, REMIX is like every other alternative fund I've ever encountered, it's good till it ain't. The minute one of these funds have done well enough to get a lot of press here at MFO it is the time to sell, not buy. Just another learning experience for me - I hope.

hank

MikeM said:

@hank, REMIX is like every other alternative fund I've ever encountered, it's good till it ain't. The minute one of these funds have done well enough to get a lot of press here at MFO it is the time to sell, not buy. Just another learning experience for me - I hope.

For sure. I use my own very broad definition of alternative. To me it’s something that may move in a different direction from most of my other assets (commodities, stocks, bonds) or which may serve to dampen overall volatility. So, for example, PRPFX is included in my “alternative” sleeve - while nobody classifies it as such. I really think that’s a better way to look at a fund when constructing a portfolio. Albeit, it makes funds harder to compare performance-wise when they’re not neatly grouped into ”categories”.

Alternatives are typically more expensive. So, not for everyone. Depends on risk tolerance, age and time horizon and also how aggressively the rest of the portfolio is positioned. The 3 year performance on REMIX looks impressive. A couple that probably fit the more standard definition of “alternative fund” than mine are BAMBX and TMSRX. I own neither presently - glad to say, as they’ve been basically treading water for awhile. I can see, however, that as a substitute for bond funds they might be attractive to some.

hank

Does sentiment have anything to do with the extent to which cable networks like Bloomberg cover the markets? More and more Bloomberg’s evening programing consists of taped interviews or hour-long paid commercials. Sometimes that’s the major portion of what appears after market close up until 1:00 AM when they pick up on Asian markets. (I realize not everyone finds the talking heads all that useful or even worth watching. But ISTM that’s a separate issue.)

Just wondering if the recent diminished coverage is because fewer retail investors tune in anymore since they’re discouraged by recent market losses and are seemingly all herding into 5% money market funds, CDs or short-term T-Bills? It may be that to attract a large audience, prosper and provide 24 hour market coverage there needs to be a bull market going in U.S. equities … Of course, all broadcast news has deteriorated markedly of late (excluding PBS). Remember the “hey-days” of the late 90s when cable financial news soared in popularity along with the stock markets? And Rukeyser? Would anyone even watch him in today’s age?

It seems some came to expect 15-25% market returns every year. It ain’t that way folks.

BenWP

@MikeM: I had a similar experience with REMIX. It has flat-lined over the last year.

yogibearbull

Jobs report today, Good Friday was within expectations. Futures and cryptos aren't showing any reaction.

Of course, the next BIG news will be CPI on Wednesday that will also nearly determine the next I-Bond rate on May 1 (expected 3-4% only vs current 6.89%).

Edit/Add: The CME FedWatch indications for May 3 rate hike also firmed up.

Sven

@yogibb, am I reading the CME FedWatch correctly that the 67% of probability of 50 bps rat hike in May?

yogibearbull

No. CME FedWatch is showing +25 bps only from the current 4.75-5.00% to 5.00-5.25%.

Sven

Upon examination again you are correct, CME indicated 25 bps hike in May.

Preliminary March CPI data from Kiplinger,

As for the next CPI report, the March inflation figures are slated for release by the BLS on Wednesday, April 12 at 8:30 am Eastern time. The Federal Reserve Bank of Cleveland's "Nowcast" (opens in new tab) predicts headline inflation to increase by 5.2% year-over-year. That would represent a slowdown from the 6% increase in prices seen in the February CPI report. On a monthly basis, March inflation is forecast to rise 0.3%, down from a gain of 0.4% in February.

https://kiplinger.com/investing/when-is-the-next-cpi-report

Also read the same data from Reuters. Perhaps this will increase the probability of a small rate hike.

orage

A large impact on the upcoming March year-over-year CPI value will be the removal of March 2022's 1.34% contribution (287.504/283.716 = 1.013351...). Good-sized drops in YoY CPI are also likely to occur when May and June 2022 drop out, assuming monthly inflation this spring remains subdued:
May 2022 1.10% (292.296/289.109)
June 2022 1.37% (296.311/292.296)

This can be readily observed in the chart @yogibearbull recently linked:
https://fred.stlouisfed.org/graph/?g=128qr

Link to Cleveland Fed's inflation Nowcast:
https://www.clevelandfed.org/indicators-and-data/inflation-nowcasting

A table of individual months' CPI values, updated each month:
https://www.bls.gov/regions/mid-atlantic/data/consumerpriceindexhistorical_us_table.htm

Sven

Thanks for the links! Will be watching next week’s CPI reporting.

By the way, treasury yield curve moved up again on Friday. 4 mo T bill peaked at 5.04%. https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value_month=202304