Investor Sentiment Crosses a Notable Threshold

Last week, the NAAIM (National Association of Active Investment Managers) Exposure Index crossed the 75% threshold, a historical level that has often signaled further gains for equities.

Historically, when the NAAIM sentiment index crosses the 75% threshold (for the first time in a 6-month period), it consistently indicates a probability of positive future returns for both the S&P 500 and NASDAQ Composite. This trend is particularly strong at the 3-month and 6-month intervals, where the observed returns show a notable 8/0 split between positive and negative outcomes. Significantly, the average returns during these periods stand at 9.11% for the S&P 500 and 12.95% for the Nasdaq Composite, emphasizing the robustness of these signals.

NAAIM member firms who are active money managers are asked each week to provide a number which represents their overall equity exposure at the market close on a specific day of the week, currently Wednesdays. Responses can vary widely as indicated below. Responses are tallied and averaged to provide the average long (or short) position of all NAAIM managers, as a group.

Range of Responses:

200% Leveraged Short
100% Fully Short
0% (100% Cash or Hedged to Market Neutral)
100% Fully Invested
200% Leveraged Long

https://www.naaim.org/programs/naaim-exposure-index/