🎙️ PRO: Weekly Strategy

Welcome to a fresh edition of We Study Markets PRO — strategic charts and market insights to inform your investment decisions.

💭 This week, we cover investor sentiment, election year mid-March seasonality, analyst EPS revisions, and returns around Fed meetings. Let’s dive in!

— We Study Markets team

Sentiment is Positive, But That Doesn’t Mean Stocks Need to Fall

This week, investor positioning continued to improve, with the NAAIM (National Association of Active Investment Management) hitting 105.

This is a rare reading and speaks to the current level of optimism in markets.

• The bottom chart shows the NAAIM Exposure Index with a black line representing “100”
  

• The top shows the S&P 500 with red dots indicating dates when the NAAIM Exposure Index crossed 100
  

While bears point to this “elevated level of optimism” as a contrary sell signal, forward return data suggests returns are actually strong when active managers are positioned bullishly.

We outlined this in the table below:

In summary, when NAAIM crosses >100:

• S&P 500 Forward 6M Returns are strong:

  • +8.1% gain on average
    

  • Higher 16/18 times (89% win ratio)

     

• And the same goes for Forward 12M Returns for the S&P 500:

  • +13.4% gain on average
    

  • Stocks are higher 15/18 times (83% win ratio)

• It implies S&P 500 5,597 by 9/19/2024
  

• And S&P 500 5,872 by 3/19/2025

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