Market sentiment report: December 2017

On the 14th December, I invited readers of the Small Cap Value Report and  to share their thoughts about the markets they invested in.

119 filled in the online survey which asked questions about what markets they invested in, how much capital they had to invest, what proportion of this was in cash today (vs 6 and 12 months ago) and what their market outlook was over the next 12 months. 

Headlines

• On average 20.5% of investors' capital is currently in cash
• This has increased 70% in 12 months (when 12.1% of capital was in cash) with a marked increase in the last 6 months (when 15.1% was in cash)
• Investors are marginally bearish about the next 12 months but nervous about a correction

1. Which markets you primarily invest in (multiple options)?

• 97% UK stocks
• 23% investment trusts
• 13% US stocks
• 12% ETF's
• 11% European stocks
• 7% Tracker funds
• 4% Asian stocks

2. Total capital used for trading (117 responses)

• 15% £1-£49,000
• 13% £50,000 - £99,000
• 25% £100,000-£249,000
• 23% 250,000-£499,000
• 10% £500,000-£999,000
• 13% £1,000,000+

3. Proportion of capital in cash: Today/6months/12months (119 respondents)

• Today: On average 20.5% of capital is in cash. This masked significant extremes with 7% of respondents saying 0% was in cash whilst 5% of respondents had more than 60% in cash including two being over 90% in cash
• 6 months ago, 15.1% of capital on average was in cash. The increase between then and now is 35.9%. 11.7% of all respondents said they had 0% in cash 6 months ago, so were fully invested - the change between today and 6 months ago is marked.
• 12months ago: 12.1% of capital was in cash. The change between today and 12 months ago is a near 70% increase in capital held in cash. The change between 12 months and 6 months is 25%. 12 months ago 22.7% of respondents had 0% of their capital in cash

4. Sentiment about the next 12 months (119 respondents)

I asked respondents to score on a seven point scale how bullish (7) or how bearish (1) they felt about their markets in the next 12 months. The mean is 4. 

The average score across the sample was 3.86, so marginally bearish 

EDIT: A reader asked whether sentiment scores varied by size of capital. The results are as follows (where 4 is neither bullish or bearish, anything over =  bullish and under = bearish). 

Those with capital used for trading:

• £1-£49K: the only bullish group at 4.3 
• £1m+ scored 3.9
• £100K-£249K and £500K-£999K scored 3.8
• £250K-499K scored 3.7
• £50K-£99K: the most bearish at 3.6

Reasons cited for these scores suggested a sense of short-term optimism about the continuing bull market but a sense of foreboding about a market correction in the next 12-18months. This is fuelled in part by concerns over Brexit, Trump and wider global instability. Many investors also cited poor returns from other asset classes and thus a continuing focus on stock market investing. But their increases in cash holdings support their bearish sentiment.

Francis

18th December 2017

PS: If you like this report, please 'like' above. Based on this, I can see whether there is interest in running this on a quarterly/half yearly basis