ARE Investor sentiment surveys WORTH ANYTHING?
I found myself being given some grief last week in the comments thread after an FT article by Chris Flood because I questioned whether investor sentiment surveys gave much useful information. The debate, perhaps because of the ‘Global investors shun UK stock market' headline, was rather hijacked by the Brexit pro and anti brigades – hence the suggestion that I was the devil incarnate from I’m still not sure which side. My perspective was simply that of an investor.
It led me to ask myself the question again. I have spent over 30 years viewing investor survey sentiments as simply publicity for the sponsor, on the basis that the information tends to be stale, sample rather than aggregate, and inconsistent because investors will not all be using the same benchmark. My comments aroused ire because I also suggested that institutions might be a little cynical in what they tell the world.
I prefer to use the risk appetite data provided by our friends at CrossBorder Capital. It is true that it answers a slightly different question: viz are investors in aggregate overweight relative to their long term average, rather than their benchmark. But it has the advantage of being timely, aggregate and it also gives a clear signal of investors’ overall risk appetite - ie. are they risk ‘on’ or risk ‘off’? Particularly at extreme times like 2007-8 (greed was on top) and early 2009 (fear dominated), the fact that this was an entirely objective signal was invaluable.
Right now? I’m awaiting end February data imminently, but at end January investor holdings in UK equities were between 1 and 2 SDs above their average.
From my experience last week, there is clearly a different body of opinion about investor sentiment out there, but if you wish to find out more how CrossBorder do it, please click here.