Our most recent edition of the monthly Bespoke Consumer Pulse report was published and sent out to clients on Friday. Each month, this report contains loads of actionable and useful data regarding the overall economy, consumer trends, and investor sentiment. One notable trend we saw in the current report was a big jump in the overall view of consumers towards the stock market. On a month/month basis, our tracker of stock market sentiment increased from 3.01 up to 3.15, which was the largest m/m increase in five months. As a result of the jump, the tracker is at its highest levels since May of 2015, which was where equities peaked in 2015 and remained through this July. That leads to the question of whether the current relatively high confidence of investors is a warning that we are once again nearing a short term top?
Looking at the performance of the S&P 500 versus our investor sentiment tracker over the past two years shows that it is probably too early to point to the current sentiment reading as a sign of an impending short-term peak. As shown in the chart, our tracker of investor sentiment has very closely tracked the performance of the stock market and does not appear to be a true contrarian indicator. In fact, even though the S&P 500 traded to a new all-time high within the past month, investor sentiment is not as high it was in late 2014 and early 2015. With the equity market trading to new highs, if sentiment towards equities was truly starting to get “out of hand,” we would expect to see our sentiment tracker moving up to much higher levels than it is now.
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