Institutional investors might have become too bullish as of late. Citi’s Tobias Levkovich’s highlights that he’s receiving substantial resistance from clients any time he even mentions the potential for a market correction.
Citi: “We are consistently surprised by the pushback we get when we discuss unpopular topics and while our meetings with investors have remained friendly, we find investors less and less receptive to our concern about a correction.”
He highlights that only 10% of stocks on the New York Stock Exchange are at or below their 200-day moving averages now. As shown below, the last time this happened was 2004 when stocks hit a rough patch and went sideways. Given the weaker economic environment we’re in, things could be worse this time around.
At very least, even if you find the predictive power of the chart below questionable, the fact that 90% of stocks are now above their 200-day moving average is a testament to just how far we’ve come from March lows.
(Via Citi Investment Research, “Monday Morning Musings”, Tobias Levkovich, 23 October 2009)