While the overall trend of economic data has been for further improvement, things have slowed recently relative to expectations.  In the charts below, we show the charts of the Citi Economic Surprise indices for the US, Emerging Markets, the Eurozone, and the entire world.  Broadly speaking, positive readings indicate that economic data is coming in better than forecasts while negative readings indicate the opposite.  Every region of the globe has pulled back over the past couple of months but for the most part, current readings remain at the high end of their historical ranges.  In fact, the indices for Emerging Markets, Eurozone, and the whole globe all sit in the top 3% of all readings in their histories. The one place that is not the case is the US.  Since last summer, the surprise index has been trending lower off of record levels, and just yesterday, it hit it tipped negative for the first time since June 2nd of last year.

Lasting 248 trading days, this was the longest streak of consecutive positive readings in the index’s history dating back to 2003.  The only other streak that lasted nearly as long was a 189 day long one which came to an end in June 2018.  Click here to view Bespoke’s premium membership options for our best research available.

The S&P 500 has been holding up at its 50-DMA in the past week while more speculative areas of the market (i.e. crypto) have experienced wild swings. As a result, sentiment on the part of individual investors has not seen much of a move.  The American Association of Individual Investors‘ weekly reading on bullish sentiment was little changed this week climbing half of one percentage point to 37%.  Although that was not a large move in the past week, sentiment has taken a big hit over the past month having fallen from well above 50%.  In spite of that big drop and even though sentiment is around the lowest levels of the past half-year, the current sentiment level is within one percentage point of the historical average. In other words, optimism is low versus recent history but is very much middling from a longer term perspective.

Meanwhile, bearish sentiment fell 0.7 percentage points to 26.3%.  Unlike bullish sentiment, that is a bit lower than the historical average of 30.5%

Those corresponding moves meant the bull-bear spread climbed to 10.7 from 9.5 the prior week.  Excluding last week, that is still one of the lowest readings since February.

Neutral sentiment has been the star of the show recently. The gain this week was tiny at only 0.2 percentage points, but nonetheless, it marked the fifth consecutive week in which neutral sentiment has risen.  At 36.7%, it is now at the highest level since the second week of 2020.

The Investors Intelligence survey of equity newsletter writers took a less optimistic tone this week as bullish sentiment fell 4.1 percentage points to a ten-week low of 54.5%.  Bearish sentiment was unchanged at the highest level since the end of March.  The survey also questions respondents on whether or not they expect a correction.  That reading rose 4.1 percentage points to 28.3% in the biggest one-week uptick since the last week of April when it rose 4.7 percentage points. That leaves the reading at the highest level since the week of March 10th.  Before that, you would need to go back to September 23rd to find as high of a reading.

Another sentiment reading that has taken an even more dramatically negative tone lately has been the National Association of Active Investment Managers Exposure Index.  This index measures how exposed to equities managers are where readings of 200 would mean they are leveraged long, 100 would be fully invested long, 0 would be neutral, -100 is fully short, and -200 is leveraged short.  This week saw the index fall another 2.65 points after a massive 40-point decline last week. That is the lowest level since last March and April of last year. Altogether, while sentiment still favors bulls, there has been a more cautious tone that has been reflected in managers reducing exposure to equities.  Click here to view Bespoke’s premium membership options for our best research available.

Recent jobless claims prints have seen the readings on initial claims consistently fall to pandemic lows while continuing claims have been a bit weaker moving sideways or even slightly higher.  This week, it was more of the same.  Initial claims came in at the lowest level since the week of March 13th of last year; the last week before the pandemic caused claims to rise by the millions per week.  At 444K this week claims dropped by 34K from last week’s revised level of 478K (original of 473K).  That was also better than expected as forecasts were calling for a decline to only 450K.  Initial claims have now fallen three weeks in a row with the drop totaling 146K in that time.

On a non-seasonally adjusted basis, claims were likewise lower for a third week in a row coming in at 454.6K which again is the strongest reading since last March. With regards to Pandemic Unemployment Assistance (PUA),  there have been several states to recently announce that they are to various extents doing away with certain programs like PUA early even though on a federal level the American Rescue Plan extended benefits through September. Without getting into the weeds on the implications of this, we would note those announcements do come in the context of very small inflows into auxiliary claims programs like PUA.  This week, PUA claims fell below 100K for the first time after falling 8.6K to 95.09K.

In spite of decelerating inflows into the unemployment insurance systems, the continuing claims picture continues to worsen.  Continuing claims were expected to fall from last week’s revised reading of 3.64 million to 3.62 million, but instead, they rose 111K.  That brings continuing claims to the highest level since mid-March and makes this week’s increase the largest in a single week since the last week of November.

Factoring in all other programs for a more complete picture adds an extra week’s lag to the data. By this measure, things look better than looking purely at regular state claims.  Total claims across all programs fell to just above 16 million at the end of April compared to 16.891 million the week before; a new low for the pandemic. PUA claims contributed the most to that overall decline with the program seeing 678.7K fewer claims week over week.  At 6.6 million, continuing PUA claims reached the lowest level since the first week of May of last year.  Regular state claims and Pandemic Emergency Unemployment Compensation (PEUC) had the next biggest contributions to the overall decline with drops of 81.9K and 150.2K, respectively.    Click here to view Bespoke’s premium membership options for our best research available.