The Sentiment Signals We're Watching
By Lori Calvasina
Published May 3, 2022 | 8 min listen
This week in the podcast we tackle the topic of investor sentiment, which has been back in focus given the S&P 500’s recent decline. The big things you need to know: First, the 13.9% drawdown in place at Friday’s close is near the range of prior growth scares, but our growth scare framework points to possible downside in the S&P 500 to 3,850 even with no recession if the Friday low doesn’t hold. Second, net bullishness on the AAII retail investor survey broke to a new post-Financial Crisis low last week, a contrarian buy signal for stocks on a 12-month forward basis. Third, positioning among asset managers in US equity futures hasn’t been quite as extreme, which suggests that institutional investor sentiment still needs to catch down to retail investors. Fourth, other widely watched fear gauges, the VIX and equity put/call ratio have moved up, another longer-term contrarian buy signal for stocks, but don’t look extreme yet. Overall, we think the data continues to paint a picture of extreme fear and a contrarian opportunity for longer-term investors, even though there is scope for further movement/more downside in the very near term on some gauges.
Lori Calvasina
Managing Director & Head of U.S. Equity Strategy, RBC Capital Markets
Lori Calvasina joined RBC Capital Markets as Head of U.S. Equity Strategy in 2017 as a Managing Director. Having spent nearly two decades as an equity strategist at major investment banks, Lori is an expert on the US stock market, and regularly represents RBC in the financial media on Bloomberg and CNBC. Prior to joining RBC, Lori was a senior equity strategist at Credit Suisse from 2010 to 2017, covering Small/Mid Cap Strategy from 2010-2014 and both Small/Mid Cap and US Equity Strategy from 2015-2017. She spent the first ten years of her career at Citi in a variety of roles including lead Small/Mid Cap Strategist from 2007-2010. In both 2008 and 2009 Lori was ranked #2 in the Small Companies category in the Institutional Investor All America Research team poll. Lori is a graduate of the University of Virginia and its selective Government & Foreign Affairs’ Honors Program. In 2019, she was named to Crains New York’s list of Notable Women in Finance.
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