As we begin to see the market run into some resistance a common occurrence is unfolding: small investors are turning bullish just as institutional investors begin to take some money off the table.
The latest data from the AAII shows that small investors have turned bullish once again as the AAII bullish % reading spikes up to 44%:
Meanwhile, institutional investors are paring back their risk. After 8 consecutive months of increases the State Street Investor Confidence index declined. The reading of 118 is still a sign that institutions are quite confident about accumulating risk assets, but the turn in the index could be the first sign that many institutional investors are turning more cautious:
“After eight consecutive increases in Global Investor Confidence, which took the Index from an all-time low of 82.1 during the financial crisis to a five-year high of 122.8, institutional investors took a breather this month and consolidated their holdings of risky assets,” commented Froot. “This month’s reading of 118.1 is still comfortably in the range associated with the accumulation of risk exposures, as a reading of 100 signifies neither accumulation nor decumulation. However, there is a recognition that a portion of the recent rise in global equity prices can be attributed to liquidity expansion rather than fundamental opportunities. Institutional investors are pausing to assess this balance.”
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.