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Below is a chart and brief excerpt from today’s Market Situation Report written by Tier 1 Alpha. If you’re interested in learning more about the Hedgeye-Tier 1 Alpha partnership, there’s more information here. |
The NAAIM index is a chart we regularly present. Representing the National Association of Active Investment Managers, it gauges active investment managers' exposure to the U.S. equity market, shedding light on manager sentiment and possible market trajectories.
We last touched on the NAAIM on August 18, when we detailed our use of this sentiment index and the associated market behavior. On the 18th, while the index was deemed short-term oversold (prompting a notable market bounce over the subsequent week), we anticipated more medium-term deleveraging. We'll provide a link to that discussion here - a revisit of that bonus chart for insight into our methodology is strongly recommended.
Active managers have since reduced their equity exposure to 40%, a drastic drop from being fully allocated just a month prior. If a 60% equity allocation was considered oversold on the 18th, could 40% be even more so now? We don't believe so. By the 18th, the Nasdaq had already plummeted over 1000 points from its peak, rebounding off solid support. With a significant daily lower high formed and much of the mega tech earnings speculation behind us, another downturn seems probable. We'll lean on our gamma model to navigate the volatility and our bands to dictate the tactical strategy. The NAAIM has undoubtedly proven its worth for us in 2023.
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Learn more about the Market Situation Report written by Tier 1 Alpha. |
