Here are two things that caught my eye the past 24 hours.
First up, hedge funds have done horribly this year. One of the bigger picture reasons we remain in the long-term bull camp is hedge funds and institutions have missed a lot of this multi-year rally. Most have been in cash, bonds, or metals – all have performed poorly versus equities. For this reason, I think most pullbacks in stocks will be very short in duration, before money is put to work.
A report from Goldman Sachs circulated yesterday that found out of 708 hedge funds (with $1.5 billion in assets) not even 5% have beaten the SPX this year. In fact, the average hedge fund was up just 4% YTD, versus the SPX up about 20% at the time of the study. Incredibly, 1 in 4 hedge funds were actually lower.
Next up, the Yale School of Management does a few different stock market surveys and one that shows how confident investors are the market will be up in one year was eye-opening.
Looking at individual investors, this was actually lower at the start of 2013 (red line) than anytime dating back to 1997. In other words, there was more fear over the market at the start of 2013 (remember all the Fiscal Cliff drama?) than at the depths of the financial crisis. Even now, after a rebound in confidence, it is still beneath previous levels of confidence since this recent bull market started. From a contrarian point of view, that is a great sign.