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The latest AAII Investor Sentiment Survey shows that the slight correction in stocks last week caused a huge surge in bearish sentiment which climbed 26.3 per cent. 54.5 per cent were bearish on the stock market for the week ending April 10. The number that were bullish fell 16.2 per cent to 19.3 per cent. Those that were neutral fell 10.1 per cent.
Phil Perlman at StockTwits thinks this could actually be very bullish. “In an environment where sentiment shifts so much on such modest declines, the shift acts like a put or hedge against lower prices. Individual investors are an emotional wreck and it is astonishingly bullish.”
Investors Shouldn’t Forget Emerging Market Junk Bonds (Alliance Bernstein)
Investors interested in emerging markets should move away from sectors to “credit quality buckets,” according to Marco Santamaria at Alliance Bernstein. Investors can now get a “reasonably diversified portfolio” in the junk bond market.
“Why consider an EMHY strategy? In a world of very low global interest rates, yield is a strong motivation. By late February, EMHY was yielding about 5.9%—roughly on par with the US high-yield market. But note that the credit quality of the EMHY market is higher. For example, an estimated 49% of EMHY is rated BB, compared with 37% in the US high-yield market. This obviously increases the relative attractiveness of EMHY.
“For some investors, an even bigger potential attraction is EMHY’s insensitivity to changes in US-dollar interest rates. …But, as the chart below shows, EMHY’s total returns have historically been very weakly correlated with those of US Treasuries—certainly by comparison with EM investment grade.”
The U.S. Economy Is Completely Out Of Balance (Business Insider)
A look a corporate profits, wages, and the employment-population ratio shows how “out of balance” the U.S. economy is, writes Henry Blodget. Corporate profits have hit an all-time high, wages are at an all-time high.
“Companies are making more per dollar of sales than they ever have before. (And some people are still saying that companies are suffering from ‘too much regulation’ and ‘too many taxes.’ Maybe little companies are, but big ones certainly aren’t. What they’re suffering from is a myopic obsession with short-term profits at the expense of long-term value creation).”
The SEC Wants To Add 250 Examiners To Police Advisors (The Wall Street Journal)
The SEC plans to add 250 examiners to oversee investment advisors. The SEC oversaw just 8 per cent of advisors in 2012, and wants to increase that to 14 per cent in 2014. 40 per cent of practicing advisors have never been examined. This proposal would see the SEC’s budget rise 27 per cent from 2012.
Independent Advisors Are Happier Than Broker Dealers (Investment News)
Independent advisors are happier with their jobs than those that work at big brokerages, according to a new report by J.D. Power & Associates. Job satisfaction climbed 20 points on average on the year to 794 among independent advisors. For broker dealers it was about the same at 695.
Commonwealth Financial Network had the highest score among independent advisors and Edward Jones had the highest score among broker dealers.
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