Singapore 9 Feb 2021
Equity buying pauses
The chart above shows cumulative buying for Equities and Equity Funds since early October. For the first time since the vaccine announcement, the buying has paused. While Funds are still being bought, there has been selling in Equities with the combined results being close to zero for the last 2 weeks.
There was a small pause during the holidays as well, but that happens every year and is therefore a non event.
What makes this current pause even more interesting is that it coincided with our first 5%+ equity prices retracement of the year. You can see that clearly in the chart above. The market has since recovered, but this recovery has happened without any fresh buying.
It is likely purely coincidental, but all the above events happened around the 26th of the month. For those into conspiracy theories, the Reddit inspired Game Stop rally also started around the same time!
Investors are getting out of individual stock picking
Another sign of increasing uncertainty is that investors, who were picking individual stocks earlier in 2020 have now started putting more and more money in Equity Funds/ETFs instead
This above behavior is consistent with a situation where the investors were finding fewer stocks that looked attractive at current prices, but felt that the overall market should still go up. Therefore instead of increasing their bets on individual stocks, they are investing into funds.
Change in Canopy Equity Sentiment Indicator
As Yogi Berra once said, it is tough to make predictions, especially about the future. Therefore this newsletter is not in the business of predicting future market direction, but we do try and estimate market sentiment. We are moving the Equity Sentiment Indicator for listed US equities from Super Hot to High Medium. Listed China equities are also showing a similar trend and we are waiting for more data before revising that estimate.
- We have seen a pause in Equity buying for the last two weeks.
- There is an increased tendency amongst investors to buy Funds instead of individual equities, which also supports the ‘investor views are uncertain’ hypothesis
- Canopy has moved the Sentiment Index for US listed equities from Super Hot to High Medium.
- You can compare your views on the market with those of other investors on our website
Please note that this newsletter is just a data analysis of actual investor behavior and does not constitute investment advice in any form.