Active Investment Managers Declare Record "Lack Of Confidence" In Their Outlook

According to the latest poll of the National Association of Active Investment Managers, even as an almost record number of respondents confirm their bullishness (a contrarian indicator), an all time high confirm that they are "not confident" in their outlook. This is a turning point for bullish to bearish sentiment inversion, as can be seen in March of 2008, when a comparable confidence reading resulted in a major drop in sentiment, which subsequently resulted in a Fall 2008 market doldrums to put it lightly.

Chart courtesy of Sentiment Trader:

And an explanation of the data:

From the website of the National Association of Active Investment Managers:

NAAIM member firms who are active money managers are asked each week to provide a number which represents their overall equity exposure at the market close on a specific day of the week, currently Wednesdays. Responses can vary widely as indicated below. Responses are tallied and averaged to provide the average long (or short) position or all NAAIM managers, as a group.

Range of Responses:

200%   Leveraged Short
100%   Fully Short
0%      Cash or Hedged to Market Neutral
100%   Fully Invested
200%   Leveraged Long.

Data collection issues that may affect the statistical significance of this data include:

Use of a single, composite number for each adviser may not accurately represent the market view of a manager who has short term and long term strategies that are providing conflicting signals or a manager who uses both contra-trend and trend following strategies for different portfolios.

Investment Styles very widely among managers participating in this survey. They may include managers that trade very frequently and can switch long and short positions daily. Other managers stay fully invested at all times and only change allocations among market segments or sectors. Still others trade around core positions and only a portion of their portfolios change, but that portion could potentially go from long to short very quickly.

Sample size: Although the number of participating managers, known as NAAIM Trend Setters, is steadily growing the sample size is not large and therefore may be less reflective of actual market conditions.


This is a contrary indicator, meaning that excessive bullishness among managers is bearish for the market and vice-versa.

The history of this survey is relatively short, however currently we use a level of 80% to be representative of an excessive net long position and 20% to be excessively net short.

We also show a "confidence" in the lower panel of the chart which is taken from the standard deviation of survey responses.  This allows us to see how much variance there is among the managers - the less variance there is, the more unanimity of opinion, and ostensibly the stronger the signal.


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