Market timers have been notoriously wrong over time and their current positioning could indicate that the recent bull market isn’t over yet, according to Mark Hulbert of Marketwatch. Hulbert’s Nasdaq Newsletter Sentiment Index tracks the positioning of market timers he follows who focus on the NASDAQ. At the end of last week it reached an extreme low level of below -50%, indicating that the market timers he follows are over 50% short the market. Given that this has been a contrary indicator, the negative sentiment actually may bode well for stocks. According to Hulbert “The HNNSI’s current level is the lowest it’s been in five years. If this were a major market top that adhered to the typical sentiment pattern, the HNNSI would have remained at a high level in the face of the market’s recent correction.” Hulbert notes that this index focuses on short-term market timers and as a result, it can fluctuate significantly, but it hits its low last Wednesday and has remained low, indicating that timers have not used this correction as a buying opportunity, and that fact may actually be a positive indicator for the market going forward.
As summer closes in, many advisers will start claiming that the “summer rally” will be coming with it, says MarketWatch’s Mark Hulbert. But, Hulbert says, don’t listen to them.
Small stocks have lagged their larger peers over the past decade. But does that mean the “small-firm effect” is dead? Not exactly, says Mark Hulbert in a recent Barron’s column.
Many investors are fearing that the recent tumble in oil prices is a sign of bad things to come for stocks. But Mark Hulbert says sentiment levels indicate that the bull market isn’t done.
Investors often pay lots of attention to who a company’s CEOs is, or should be. But MarketWatch’s Mark Hulbert says they are probably wasting their time.
“In fact, according to Rakesh Khurana, a professor of leadership development at Harvard Business School, a corporation’s internal culture ‘exerts a far greater longer-term influence on the company’s success’ than a CEO,” Hulbert writes. “’Large-scale statistical studies have failed to find any direct causal link between CEOs and firm performance,’ he told me.”
Hulbert says that culture is difficult to quantify. “But one academic study found that a good measure of corporate culture is responsiveness to shareholder concerns — as measured by the presence or absence of governance structures that enable or prevent shareholders to effect change,” he writes. “That study, by Andrew Metrick of Yale University, Paul Gompers of Harvard University and Joy Ishii of Stanford University, found that the shares of companies that were most responsive to shareholders gained an average of 8.5% more per year than companies that were the least responsive.”
MarketWatch’s Mark Hulbert says that stock market sentiment has recently reached “dangerous proportions”, but also says that means little for longer term market performance.
In a recent column, Hulbert said that the average level of equity exposure among a group of market-timing newsletters he monitors through Hulbert Financial Digest was at nearly 94%, a level that, when reached, has been accompanied almost every time by a short term peak or near-peak in the Nasdaq Composite Index in recent years. “But notice also that, after each of those recent pullbacks, the market’s uptrend resumed,” Hulbert added. “It would have been a bad idea for someone on any of those prior occasions to have declared the bull market over and gone completely to cash.”
Hulbert analyzed historical data and found that up until about ten years ago, sentiment data “had its greatest explanatory power at the three-month horizon. That’s a short enough horizon already, but it has shrunk in recent years — and is now little longer than one month.”
Hulbert says the recent overly bullish mood “now tells us little more than that the market is vulnerable to a short-term decline lasting little more than a month — maybe three.” Sentiment won’t cause a new bear market, he says.