SATS - CDT Insider Sentiment Ratio March 2024: High Sentiment
2024-04-02 09:30:00 ET
Summary
- In Q1, the S&P 500 packed in a year's worth of returns in just one quarter.
- After a 2-month hiatus, insiders returned to the market with relative purchase activity not observed since the end of 2023.
- March's jump in sentiment amid a market rally lays in stark contrast to the group's notorious reputation as astute contrarian investors.
Free to Move About the Cabin
A Year's Worth of Returns in 90 Days. In Q1, the S&P 500 packed in a year's worth of returns in just one quarter. On a total return basis, for the last 10 years, quarterly returns have averaged +3.8%, for Q1 2024 that number was an impressive +10.6%. Ostensibly, given this remarkable return profile, we should and do have valuation concerns for the market. Since the October 2023 low, the S&P 500 total return has gone up a blistering +28.5%, pushing up our normalized price-to-earnings ratio to 24.5x, or 22% above the average 20x since 1997. Moreover, with the 10-year averaging 4.2%, the excess earnings yield or the earnings yield (P/E inverted) minus the 10-year Treasury rate is now negative for the first time since 2007. To be absolutely clear, we are not making the case that a 2007-like bear market is imminent, the Great Financial Crisis did not result because of lofty stock market valuations. However, we are observing an inflection between the relative attractiveness of the fixed income market and stocks that should not be ignored. According to our research, when the excess earnings yield is negative, the probability that the next quarter's returns will be negative too is 66.7%. That is double the normal risk of the market....
CDT Insider Sentiment Ratio March 2024: High Sentiment