Tag Archives: S&P 500

PPI, CPI and Profit Margins

If you have been following the site for awhile you know that I frequently focus on profit margins. Currently, the profit margin on the S&P 500 index is 8.1%[1] versus a median level since 2000 of 6.5%. Corporate profits as measured by GDP[2] are 8.2% versus the long-term average level of 6.0%. As I have analyzed in the past, high corporate profit margins typically lead to below average profit growth in subsequent years. This is due profit margins being mean reverting. I would expect corporate profits growth to be below average going forward for this reason alone but another factor Read more of this post

Sentiment Update: We Won’t Get Fooled Again or Meet the New Year, Same as the Old Year

Both investor sentiment surveys I follow showed bullish sentiment remains wells above average. The NAAIM (active money managers) survey for this week showed a minor decrease of 1.7% in bullish sentiment while the AAII (individual investors) survey showed an increase of 4.3%.

This week we will take a look at one additional chart courtesy of Read more of this post

Investor Sentiment and Subsequent Returns

A recent post by The Pragmatic Capitalist on the topic of investor sentiment has me curious regarding the correlation between sentiment and subsequent returns of the S&P 500 index. Last weeks’ survey has bullish sentiment at 45%.

This analysis will consist of data from the AAII Investor Sentiment Survey and be divided into four sections. The first section will look at the entire data series, which started in 1987.  The second will look at instances of “extreme” bullishness where bullish sentiment was 50% or higher, one standard deviation above the average bullish sentiment of 39%. The third section will look at instance of “extreme” bearish sentiment where bullish sentiment was 28% or lower; one standard deviation below the average. Finally, the last section will look at periods where the eight week moving average of bullish sentiment was above 50%. Read more of this post