There’s this notion flying around that somehow because the calendar has flipped to November that we’ve gotten the all clear signal and there is somehow less risk in equities.

I think most people get the flawed logic there.  However, at the end of the day, that’s what the data says.  Let’s do a quick walk through.

So say you’re an average investor who pays attention to the calendar.  You’ve been worried because bad things have happened in August, September, October before.  You get to November and now the market quants area telling you hey since nothing bad happens in the fall it leads to a great ‘Best 6 Months of the Year’.  It doesn’t matter who your preferred quant is, the numbers are the numbers.

At this point we have some FOMO in the markets with more stocks ripping all the time, but also more cracks building and showing up.  You get this emboldening, comforting data and all of a sudden fear gets pushed aside.  Check out the AAII survey of individual investors.  Less and less people are bearish, even though the reasons to be negative are rising.

aaii

This chart from Willie Delwiche shows just how individual investor fear has faded as we’ve worked through fall with no major market issues.

willie

I love the quants, they’re great.  But when we all drink-in the same comforting data, there are times we’ve got to be on our toes.  Many programmers and individual investors are sipping the cool aid.  With divergences building up, at some point something has to give.