Barron’s over the weekend had some great stats in the Streetwise article by Kopin Tan. I definitely recommend you take sometime to read the whole article here.
Now here were a few stats I found very worthwhile and my quick takeaways.
Credit Suisse’s latest survey of global investors showed 88% who believed stocks will be the best asset class over the next two years, but only 65% who said the same for the next three months, a sign of short-term hesitation.
Anytime you see 88% of anyone agree on something, I start to worry. Remember the Great Sanhedrin in Ancient Jerusalem? If everyone on the council agreed on a topic, they immediately threw it out. The logic 2,000 years ago is the same as it is today. Things aren’t ever as obvious as they seem and the crowd rarely makes the correct decision.
And just over 35% of U.S. private pension assets are in equities, below the long-term average near 44%.
This has long been a bullet point for remaining bullish equities the past few years. Pension funds historically are horrific market timers. From being record net long in early 2000, to totally avoiding stocks during this historic run the past three years, pension funds are one you want to fade.
In fact, over the past three years, pension funds have actually lowered their equity allocations while the SPX has gained each of the past three years. This has never happened in over a generation at least. Seeing them still well under-invested is a nice sign.
Roughly 68% of fund managers are trailing their benchmarks this year, with 32% lagging by a gap of 2.5 percentage points or more, notes Thomas Lee, JPMorgan’s equity strategist.
I’ve seen stats like these before and although I’m not sure how to validate them, if true, then it is rather powerful for the bulls. The thinking is so many ‘smart’ money managers have missed this rally, they will use any and all pullbacks to invest in stocks. Todd Salamone touched on this some here in a great read. For this reason, the 5% drop we had recently might be about all we’re going to see. Remember, in ’95 and ’54 the market rallied all year and the biggest pullbacks we saw were less than 5%. So it is possible we could be seeing that type of rally once again. Maybe not, sure, but be open to it is my take. It doesn’t mean we have to go straight up though, as there will be sideways times - but don’t sit around waiting for that ‘big’ pullback, as it might not happen.