As I was doing my weekly S&P500 #ChartStorm on Twitter a rather interesting chart caught my attention. It was one of the series from the Yale School of Management International Center for Finance Stock Market Confidence Indices. The chart, from TN on Twitter, shows the individual and institutional investor 1-year confidence indexes. These indexes track the proportion of responses that expect 1-year forward returns to be greater than 0 (i.e. positive). In other words, the proportion of people who expect stock prices to be higher a year from now. The remarkable thing about this chart is that the institutional line has reached 100% (every single respondent expects positive 1-year returns), and 98.92% of individuals surveyed.
The chart attracted a lot of controversy and comment on Twitter. To be fair it is an extreme reading. And a surprising one at that given there still seems to be a number of bears out there. Even just looking at the more mainstream investor surveys the latest AAII survey had 32.1% bears and the Investors' Intelligence survey 16.2% bearish. I decided to run my own survey on Twitter and found very different results. These are shown as dots on the second chart below. In my survey institutional investor confidence came in at 43.5% and individual at 45.5% - both about half that of the Yale survey. I'm not going to speculate as to why but I will include another Yale survey chart, that of valuation confidence, and that alone might be just enough to square it up!
The chart in question - institutional and individual 1-year investor confidence at an all time high.
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Here's the same chart but with the Twitter poll results added in (the red dots). Maybe it will be worth maintaining this survey going forward!
While forward stock market return expectations are looking somewhat euphoric, confidence in valuations has fallen close to levels last seen during the dot-com mania. Note: the lower the reading the more respondents are saying stockmarket valuations are too high.
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Article by Callum Thomas, Top Down Charts