Active managers have rarely been so confident about stocks

One indicator getting some attention in recent days is the NAAIM survey of active investment managers. We've been following this since I consulted with former NAAIM president Will Hepburn on its construction back in 2008. It can be a useful indicator to follow, though like most surveys, it tends to be most useful from a contrarian point of view when managers quickly panic.

The most recent week shows not only a high average exposure to stocks, but also maximum exposure of 200%, the least bullish manager is 50% exposed, and there is a massive amount of group-think with a low standard deviation among responses. Taken all together, these managers are among the most confident they've ever been.

NAAIM survey is very confident

The problem with assuming that this is a contrary indicator is that it doesn't work. When these trend-following managers have become supremely confident, the S&P has tended to keep going. has paid to become a bit more defensive on some of the higher-beta stocks after these jumps in optimism when looking at the ratio of the highest-beta stocks in the S&P 500 to the index itself.

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We also looked at:

  • A more in-depth look at the current market environment
  • Tables showing all instances when NAAIM managers were this confident, and what happened afterward

The post titled Active managers have rarely been so confident about stocks was originally published as on on 2020-08-17.

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