By Saqib Iqbal Ahmed
NEW YORK (Reuters) – A steadily rising U.S. stock market appears to be drawing investors off the sideline, one measure of market positioning showed.
Positioning among discretionary investors – a cohort that includes everyone from portfolio managers to retail investors – broke out of its one-year underweight range and went above neutral for the first time since February, data from Deutsche Bank showed Friday.
That turned the bank’s measure of total equity positioning by investors to overweight last week for the first time in over 16 months, the bank’s strategists said in a note.
“The jump in discretionary positioning this week stemmed largely from a big surge in survey sentiment which went from net bearish to strongly bullish in a week,” the strategists wrote.
The shift comes after months during which discretionary investors sat on the sidelines while systematic investors – funds that take a repeatable data-driven approach and rely on computers to identify investment opportunities – have been steady buyers, according to Deutsche Bank.
Stocks’ steady march higher may be drawing the human stock pickers in, market watchers said. The S&P 500 index extended its gain last week to 20% from its October lows – one definition of a bull market.
“A lot of it has to do simply with stocks moving up … buyers attract more buyers,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder. “It’s sort of that herd mentality.”
A 20% gain from bear market lows has in the past heralded further upside for stocks.
In four of the last six bear markets, the S&P went on to rise 20% or more in the six months after hitting this milestone, a Reuters analysis showed.
On Monday, the S&P 500 was up 0.71% at 4,329.26, a 10-month high, up about 21% from its October low.
Of course, plenty of risks remain for equity investors. Market participants are awaiting U.S. consumer price data on Tuesday, followed by the conclusion of the Federal Reserve’s monetary policy meeting a day later.
(Reporting by Saqib Iqbal Ahmed; Editing by Ira Iosebashvili and Nick Zieminski)