Bad Breadth Across Sectors Wed, Feb 26, 2020 No sector has been safe from this week's declines. Not a single sector is higher than it was five days ago although the declines for defensive sectors like Consumer Staples (XLP), Utilities (XLU), and Real Estate (XLRE) have been less than those of other sectors. More cyclical sectors, on the other hand, are down at least 3% compared to one week ago. With regards to these sectors' trading ranges, the past week's declines leaves most of these deep in oversold territory. Energy, Financials, Health Care, Industrials, Materials, and the S&P 500 more broadly are now over two standard deviations below their 50-DMA as shown below in the trading range charts from our Daily Sector Snapshot. Looking through some other charts included in our Sector Snapshot, the spread between the price and 50-DMA in percentage terms for Consumer Staples, Energy, Financials, Industrials, Materials, and again the S&P 500 more broadly is at the lowest level of the past year. With every sector having moved lower, there are now only two sectors that are above their 50-DMA (positive 50-DMA spread): Real Estate and Utilities. Not only are sectors falling below their 50-DMAs, but so are the individual stocks within each sector. The charts below show the percentage of stocks within each sector that are above their 50-DMAs. As shown, every sector has seen these readings fall sharply over the past several days. Energy is the worst of these as not a single stock in that sector is above its 50-DMA. Although not quite as bad, Industrials, Materials, and the S&P 500 also have the fewest stocks above their 50-DMA of all readings of the past year. Across the board, breadth has been notably weak as we discussed in last night's Closer. One way of showing this is through 10-day advance/decline lines. As with most other indicators, these have fallen sharply over the past several days which means there have been far more stocks moving lower than higher each day. Over the past couple of weeks, each sector had reached fairly extreme overbought levels (red shading in charts below) at some point. But the extremely week breadth since those peaks has left every sector with the exception of Real Estate with a negative 10-Day A/D line reading. Now these lines are approaching oversold levels. Finally, every sector outside of Health Care has seen more stocks reaching new 52-week lows than 52-week highs. The net percent of stocks at 52-week highs for Consumer Discretionary and Energy have blown the lowest readings of the past year out of the water. For both of these sectors, these are the lowest reading since late December 2018.
Russell Rarely This Oversold Wed, Feb 26, 2020 The massive declines in equities this week has sent the major indices reeling in their respective trading ranges as shown in the snapshot of our Trend Analyzer below. Every major index ETF is now extremely oversold (2 standard deviations or more below their 50-DMA) with the exception of the Nasdaq 100 (QQQ). That compares to one week ago when just about everything was overbought, some to nearly extreme degrees. One interesting point concerning the Nasdaq is that despite having fallen the most in percentage terms over the past week, it is the only index that entered today up on the year and it remains the least oversold of these index ETFs. While perhaps not to the same degree as QQQ, another dynamic worth mentioning is that small and mid-cap indices are much more oversold than large caps. The small-cap Russell 2000 has generally underperformed large-caps for much of the past two years (it still has not gotten back up to its summer 2018 all time highs), and this recent weakness leaves it much more dramatically oversold than other major indices. As of yesterday's close, the Russell sat over 4 standard deviations below its 50-DMA. That compares to the prior day when it was just over 2 standard deviations below and the day before when it was within one standard deviation of its 50-DMA. This is only the sixth day in the index's history that it had gotten this oversold. The last time this happened was in August 2011. Prior to that there was one occurrence in August 1990 and another cluster of three days in during the October 1987 crash. Performance following these prior instances have been very mixed. While the 1987 and 1990 instances were followed by severe declines in the Russell 2000 over the next few months, more recently in 2011 performance was very strong over the next year. Join Bespoke Premium to access Bespoke's most actionable stock market research and analysis.
Global Equity Benchmarks Distance From YTD Highs Wed, Feb 26, 2020 The recent equity sell-off has clearly been global in nature as concerns of a global pandemic rise. Perhaps the most surprising aspect of the way equities have sold off recently is that the country that has been hardest hit by the virus is closer to its YTD high than any other major global equity benchmark. The chart below shows the distance that each major global equity benchmark has declined relative to its YTD high. China's Shanghai Composite is down just 4.45%, which is better than any other country shown. Sure, you could argue that the Chinese government is manipulating the market and prohibiting investors from selling, but even the ETF that tracks the CSI 300 (ASHR) is down less than 6%, so anyone could go in and trade at these levels. Manipulated or not, the numbers are the numbers. At the bottom of the list, Brazil's Ibovespa index is down more than any other country at 11.6% and that country has only reported one confirmed case so far. With respect to US indices, the Russell 2000 is down the second most of any major global benchmark (-9.19%), while the Nasdaq is down the fourth most at 8.68%. Even the S&P 500 is down close to 8%. These weak US readings come in a backdrop where there have only been 57 confirmed cases and all but a couple are instances where Americans contracted the virus outside of the United States and have been brought to the US under quarantine. Join Bespoke Premium to access Bespoke's most actionable stock market research and analysis.
Claims on the Rise Thu, Feb 27, 2020 Initial jobless claims rose this week, albeit at a slightly larger than expected rate (219K vs 212K estimate). Claims have now risen in back-to-back-to-back weeks for the first time since September after bottoming out at 203K which was the lowest print since last spring's multi-decade lows. While claims are up, the fact that the magnitude of the increases has been small and that claims were coming off of already low levels, this week's print only leaves us at similar levels to the second half of January. As claims have moved slightly higher over the past few weeks, so too has the four-week moving average, rising 0.5K to 209.75K. As we have mentioned in the past, although we have gotten close in recent weeks, initial jobless claims have yet to put in a new cycle low for some time now. As shown in the charts below, for both the seasonally adjusted number and moving average there has not been a new cycle low for 45 consecutive weeks. Those are the longest such streaks of the current expansion. As we have discussed in the past, this is more of a representation of the lack of improvements for claims rather than degradation in labor data, especially as the level of claims remains at fairly healthy levels. Turning to the non-seasonally adjusted number, claims have fallen again as is the norm for this time of year. Now at 199.1K, claims are well below their average for the current week of the year since 2000. While lower than last year, the comparable week in 2018 saw an even lower reading of 196.3K.
Sentiment Slides Thu, Feb 27, 2020 Sentiment has come down over the past week according to survey data from AAII. The percentage of respondents reporting bullish sentiment fell over 10 percentage points this week down to 30.43%. That is the lowest level of bullish sentiment in the past few months but it could also be much lower, especially considering how much equities have fallen in the past week. As recently as October bullish sentiment was around 10 percentage points lower at 20.31%. Furthermore, while this brings it below the historical average for bullish sentiment (38.08%), from current levels it would need to fall roughly another 2.5 percentage points to be a more extreme 1 standard deviation below that average. Additionally, this past week's drop was large, in the fourth percentile of all weekly changes of the past five year's readings, but only a few weeks ago at the end of January we witnessed an even larger decline of 13.62 percentage points. Overall, while sentiment has come crashing down, it seems to be a bit more modest of a decline when compared to the rapid 8.75% drop in the S&P 500 since the results of the last survey. As could be expected, the losses in bullish sentiment were picked up by the bearish camp this week as AAII's reading on bearish sentiment rose from 28.7% to 39.13%. As with bullish sentiment, while that was a large increase in the 95th percentile of the past five year's weekly changes, we saw an even larger rise of 12.09 percentage points just a few weeks ago at the end of January. This is the highest level bearish sentiment has been since October 10th when it had reached 43.96%. Neutral sentiment, on the other hand, was little changed this week at 30.43%. Rather than showing caution, investors seemed to have immediately gone from bullish to bearish in the past week.
Covid-19 Slowing Manufacturing Mon, Mar 2, 2020 Similar to the final Markit readings for the month of February released this morning, the headline February ISM Manufacturing number has yet to show any major negative impact as a result of the coronavirus outbreak. The headline index was expected to fall to 50.5 from 50.9, but the actual decline was larger down to 50.1. Despite the weaker than expected reading, the ISM Manufacturing index remains at expansionary levels, and it is also a stronger reading than most months since the second half of 2019. While the headline number may not flash any huge negative impacts from the coronavirus, the commentary section of February's report makes frequent mention with respondents stating that the virus is "wreaking havoc" as it poses "a major supply chain risk." Likely due to the timing of the surveys predating the other major outbreaks around the globe, the comments mainly make note of the effects of the virus on operations in China. In other words, seeing as this data is lagged a bit, the full effects of more recent outbreaks outside of Asia (namely China) are not likely to be fully reflected in the February report. Breadth across the individual categories of the report was on the weaker side with only three improving from January and only two improving versus one year ago. These moves have brought the indices for New Orders, Prices Paid, and Imports all into contraction territory from expansionary readings in the prior month. Again, the headline index did not experience any major shifts as might have been expected as a result of Covid-19, but under the hood, some components are beginning to show a more prominent negative impact. The worst of those declines were for Imports which fell from 51.3 in January to 42.6. As shown below, that is the weakest reading since the Financial Crisis (May 2009) when it dropped down to 38.5. The 8.7 point decline was also the largest month over month decline on record in the data going back to 1989. This drop is perhaps the most obvious result of Covid-19 disruptions. Shutdowns from the virus in addition to the New Years Holiday in China would have resulted in weaker trade activity. Export orders are echoing this as they declined 2.1 points although that drop was not nearly as large as that of imports. Supplier deliveries (readings above 50 indicate longer delivery times and under 50 indicate faster deliveries) are giving further evidence to negative impacts from the Coronavirus. The index surged to 57.3 in February from 52.9 in January. That is the highest reading since November 2018 and was the largest one month increase since June of 2018. In other words, suppliers are struggling to deliver due to supply chain disruptions. As suppliers struggle to deliver, backlogs have begun to grow with the index ticking up to 50.3. That is the first expansionary reading since April of last year.
Down January & Down February: S&P 500 Posts Full-Year Gain Just 43.75% of Time The combination of a down January and a down February has come about 17 times, including this year, going back to 1950. Rest of the year and full-year performance has taken a rather sizable hit following the previous 16 occurrences. March through December S&P 500 average performance drops to 2.32% compared to 7.69% in all years. Full-year performance is even worse with S&P 500 average turning to a loss of 4.91% compared to an average gain of 9.14% in all years. All hope for 2020 is not lost as seven of the 16 past down January and down February years did go on to log gains over the last 10 months and full year while six enjoyed double-digit gains from March to December.
Take Caution After Emergency Rate Cut Today’s big rally was an encouraging sign that the markets are becoming more comfortable with the public health, monetary and political handling of the situation. But the history of these “emergency” or “surprise” rate cuts by the Fed between meetings suggest some caution remains in order. The table here shows that these surprise cuts between meetings have really only “worked” once in the past 20+ years. In 1998 when the Fed and the plunge protection team acted swiftly and in a coordinated manner to stave off the fallout from the financial crisis caused by the collapse of the Russian ruble and the highly leveraged Long Term Capital Management hedge fund markets responded well. This was not the case during the extended bear markets of 2001-2002 and 2007-2009. Bottom line: if this is a short-term impact like the 1998 financial crisis the market should recover sooner rather than later. But if the economic impact of coronavirus virus is prolonged, the market is more likely to languish.
Newsletter Writers Turning Bearish Thu, Mar 5, 2020 In an earlier post, we detailed how AAII's weekly sentiment survey has shown respondents have become increasingly polarized taking bullish and bearish stances. Another sentiment survey of newsletter writers from Investors Intelligence, on the other hand, leans more distinctively bearish. This survey's reading on bullish sentiment fell to 41.7% in the latest week which is the lowest reading since January of last year. Granted, at that time bullish sentiment reached much lower levels bottoming at 29.9%. Meanwhile, bearish sentiment is at its highest level since March of last year. Like bullish sentiment, while it is at one of its highest levels in some time, it also topped out at much higher levels just over a year ago. Bearish sentiment peaked at 34.6% in the first week of January of 2019, 14.2 percentage points higher than current levels. While the Investors Intelligence survey does not have a reading on neutral sentiment like AAII does, it does survey respondents for those "looking for a correction". With the S&P 500 having fallen 12.76% from the February 19th closing high to Friday's closing low, price action has met the definition of a correction and as such the number of respondents reporting that they are looking for a correction has surged to 37.9%. That is the highest reading since June of last year when it reached 38.8% and in the 93rd percentile of the past decade's readings. Overall, bearish sentiment has generally taken over now which is positive from a contrarian's position, but as recently as the past year, there is a precedent of it being even higher.
A Day for the Decade Mon, Mar 9, 2020 There have been bigger declines in the equity market throughout history, but not many. In fact, for the S&P 500 and many sectors, larger one-day declines haven't been seen in at least a decade. The S&P 500 fell more than 7.5%, which was the largest one-day decline for the index since 12/1/08. After today's drop, the US equity benchmark is down to its lowest level since June 3rd of last year. In terms of individual sectors, ground zero for the market was the Energy sector. Going back to 1989 when daily data begins, today's 20.1% decline was the largest one-day drop on record, and the index is now at its lowest level since August 2004. That's not a typo! The only other sector that was down more than 10% today was Financials, which saw its largest one-day decline since 4/20/09 and is at its lowest level since Christmas Eve 2018. Industrials was another hard-hit sector today, and while it was down less than 10%, the 9.2% drop was still the largest one-day fall since at least 1989 and took the index to its lowest level since January 2019.
The Dow Can Thank Boeing for Its Nosedive Wed, Mar 11, 2020 It's been a tumultuous month for the Dow Jones Industrial Average since its closing high on February 12th as the index has declined over 5,500 points or 18.8%. Below we have provided a breakdown of which stocks have had the largest and smallest impact on the decline. For each stock listed below, we have included its performance since the close on 2/12 in both percentage and price terms. The reason, of course, for including price changes is because the index is price-weighted. Therefore, a stock with a low share price but a large percentage decline may not have as large an impact on a stock with a larger share price but a smaller percentage decline. Because of this, the table is sorted by stocks with the largest weighting in the index (highest share price) at the top. Remember the days when Boeing (BA) was the most heavily weighted stock in the DJIA? Well, it was only a month ago! Back on 2/12 when the DJIA last peaked, BA was the most heavily weighted stock. But after a decline of nearly 40% since then, it's now the fourth most heavily weighted behind UnitedHealth (UNH), Apple (AAPL), and Home Depot (HD). Since 2/12, BA's decline has accounted for almost 17% of the DJIA's decline, or more than 900 points! Not only has BA been the largest contributor to the DJIA's downside, but the next closest drag on the index (Goldman Sachs - GS) has had less than half the impact to the downside. Other relatively large contributors to the downside have been Apple (AAPL), United Technologies (UTX), and JPMorgan Chase (JPM). On the upside, there hasn't been much. Since the DJIA's closing high on 2/12, the only stock that is up is Walmart (WMT), but with a gain of 0.1%, its impact on the DJIA's level has been less than a point.
Selloff Erases All of US Market Cap Gains Since Election Day 2016 Thu, Mar 12, 2020 With the US stock market down nearly 7% yet again today, the total market cap of US companies as measured by the Russell 3,000 has fallen $11.5 trillion in less than a month. On February 19th, total US market cap was just over $35 trillion. It's at $23.8 trillion as of this morning. What makes this drop even more noteworthy is that $23.8 trillion was the market cap of US companies on Election Day 2016. At this point in time, all of the market cap gains seen since President Trump's election victory have been wiped out.
Sentiment Sours Thu, Mar 12, 2020 With equities entering bear market territory this week, current sentiment understandably holds a significant bearish bias. Bullish sentiment fell 9 percentage points to 29.74%. While low, sentiment was actually lower as recently as October, August, and the spring of last year. While that means there is precedent for bullish sentiment to fall even further, the current level is pretty much right in line with what could be expected at the start of an S&P 500 bear market. In the table below, we show the AAII sentiment readings at the start of all bear markets (20% drawdown from a prior high where the rally was at least 20%) since the survey began in 1987 as well as the degree of those declines and the time it took to reach that 20% threshold. The current reading on bullish sentiment is pretty much right in line with the average of past bear markets. Meanwhile, bearish sentiment is at 51.13% which is its highest level for when the S&P 500 reached the threshold for a bear market behind only July of 2008. Neutral sentiment (18.95%) is now at its lowest level since December of 2018 at 18.95% and of the past bear markets, this is the lowest reading. For just the 56th time since the beginning of the survey in 1987, over half of the respondents reported as pessimistic. Bearish sentiment rose 11.49 percentage points from 39.64% to 51.13%. That 11.49 percentage point jump is in fact large, in the 96th percentile of the past decade's readings, but as recently as the end of January there was a bigger one week increase of 12.09 percentage points. This leaves bearish sentiment at its highest level since April of 2013 when bearish sentiment reached 54.48% Readings above 50 have been few and far between with only 56 other prior instances in the history of AAII's survey. The last time we saw a reading this high was was 441 calendar days ago in December of 2018. The table below shows all of the prior times that bearish sentiment tipped above 50% without having done so in the previous 6 months and the S&P 500's performance around these times. As could be expected, the S&P 500 was typically heading lower in the weeks and months leading up to these elevated bearish readings. Going forward, performance has tended to remain weak over the following week, but begins to improve over the course of the next year.
The Fastest Bear Market Ever The historic volatility continues, with the Dow Jones Industrial Average officially setting its fastest move from a new all-time high to a bear market (down 20% from the highs) in the 124-year history of the index. It took only 19 days for this to take place, which is far and away the new record. Not to be outdone, the S&P 500 Index is set to close down 20% from all-time highs today, doing this in only 16 days. Again, as of the time we are writing this blog, the S&P 500 is in bear market territory, but there always could be a chance for a late-day rally. “From major sports postponing their seasons, to travel bans to Europe, the economic impact of the coronavirus is growing exponentially with each passing day,” said LPL Financial Senior Market Strategist Ryan Detrick. “Markets are pricing in a potential recession and inevitable second quarter slowdown, but it is all about expectations. Should the virus be contained and the worst-case scenarios not materialize, now could be a nice opportunity for longer-term investors.” Last, one of Warren Buffett’s most famous quotes is, “Be fearful when others are greedy and be fearful when others are fearful.” We’ve seen many signs of extreme fear the past few days, but the CNN Fear & Greed Index hitting 1 earlier today is quite a historic level of fear. This proprietary indicator looks at multiple inputs (like put/call ratios, momentum, and volatility), but on a scale of 1-100, this morning’s 1 is the lowest level ever seen, besting the 2 it hit at the lows in December 2018. From a contrarian point of view, this could be quite meaningful. Source: CNN Business 03/12/20
Fall of the Empire Mon, Mar 16, 2020 One of the first big drops in US economic data showed its face today in the form of the first of the regional Fed indices covering the month of March. The NY Fed's headline reading on general business conditions experienced it largest drop on record in March, falling 34.4 points from 12.9 in February to -21.5. That is the first negative reading since June of last year, but the lowest level of the index for current conditions since March of 2009 during the financial crisis. Back then, the index remained below -20 for six consecutive months. Prior to then, the only similar readings can be found early in the survey's history in November of 2001. As for expectations six months out, this month's reading of 1.2 is again the lowest reading since early 2009, and as with the current conditions index, you would need to go back to 2001 to find similarly low readings before that. The 21.7 point decline in expectations this month is also the largest one month decline since January 2009 when it dropped by slightly more (24.9 points). Overall, New York area businesses' outlook in both the near term and further out have deteriorated dramatically in just one month. Of the individual components, pretty much everything was weaker this month for both current conditions and expectations. Only two categories (expectations for unfilled orders and inventories) rose this month. Other than the headline index, the two categories who's declines stand out the most, and likely drove the large declines for the headline number, are for new orders and shipments. While other categories' declines are much more modest by comparison, they too are significant nonetheless. The index for new orders fell from 22.1 last month to -9.3. This was slightly lower in June of last year when it had fallen to -9.7, but the 31.4 point month-over-month decline was the third largest on record behind October of 2001 (43.2 point drop) and November of 2010 (31.8 point drop). With current demand drying up, expectations for the future are also weak as the index for expectations six months out fell to 17.6 from 27.5 in February. While this does not draw parallels to the financial crisis like other aspects of this month's survey, this is the lowest level since January 2016. Given the weaker demand, the index for shipments has also come down a lot. The current conditions index for shipments is in negative territory, -1.7, for the first time since October of 2016. The 20.5 point decline from last month is the largest decline since August of 2015. As for the forward looking indicator, conditions have not fallen off of a cliff in the same way, but are at the low end of the past several year's range. Now at 20.5, it is at its lowest level since only October. Weekly jobless claims have been one economic indicator that have been closely watched over the past several weeks given their higher frequency and potentially more timely reading on the impacts of Covid-19 on the American workforce. While nothing has shown up there, the NY Fed's indices for number of employees and average workweek have turned lower. The index for number of employees has been significantly lower multiple times in the past few years making the drop to -1.5 nothing too crazy, but the 8.1 point decline was the largest in over a year. Meanwhile, expectations for increasing the number of workers six months out is at its lowest level since 2017. Not only are NY area businesses not taking on more workers, but the index for average workweek fell to -10.9 which is the lowest level since December 2015.
GDP Forecasts Relative to History Tue, Mar 17, 2020 Yesterday, Goldman Sachs' lead economist cut the bank's GDP forecasts for the first half down to 0.0% in Q1 and a decline of 5.0% for the second quarter. Based on how things are moving and in the direction they are going, 5% may sound like an optimistic scenario. While all sorts of numbers have been thrown around regarding just about everything lately, we wanted to help put in perspective just how severe a quarterly decline in GDP of 5% really is. The chart below shows US quarterly GDP going back to 1950. First of all, negative quarters for GDP have been uncommon for the US economy over time. In the 291 quarters since 1950, the US economy has only contracted in 41 (14%) of those quarters. 5% declines, however, are incredibly rare. SInce 1950, there have only been six prior quarters where GDP declined by 5% or more with the most recent being back in December 2008. Obviously, the circumstances surrounding each contraction in GDP is different, but prior quarters where there was such a large shock to the system were typically not 'one and done' events. In fact, all six of the prior quarterly contractions of 5% or more were either immediately preceded or followed by another quarter of negative growth averaging a decline of over 2%.
The COVID Crash of 2020 Wed, Mar 18, 2020 Below is a snapshot of month-to-date and year-to-date returns for 72 country stock markets around the world (in local currency). As of this morning, the average country was down 20% month-to-date and 26% year-to-date. And this doesn't even include the levels that North and South American equity markets are set to open at this morning, which looks to be 5-7% lower from yesterday's close. The country that has been hit the hardest in terms of equity market price destruction is Russia, which we haven't heard from much regarding the COVID-19 virus. Month-to-date, Russia is down 34.67%, and it's down 45.18% year-to-date. Seven other countries are down more than 30% month-to-date, including Italy, Greece, Austria, and Ireland. France and Germany are both down close to 30%, while BRIC countries like Brazil and India are down more than 24%. Notably on the other side of the spectrum is China, where markets are down only 5% month-to-date and 10% year-to-date.
Largest Drop in Philly Fed Manufacturing On Record Thu, Mar 19, 2020 Just one month ago, manufacturing businesses surveyed by the Philadelphia Fed indicated the most optimistic outlook since early 2017. Throw in the massive impact of the coronavirus and in one month that picture has been completely turned on its head. Falling from 36.7 last month to -12.7 this month, the headline index is now back to the same level it was at in July of 2012. Each of the individual components also fell quite dramatically with all but two, Number of Employees and Average Workweek, falling by double digits. Not a single component rose this month with multiple components, in addition to the headline index, falling into negative territory. The worst decliners were those measuring demand as the indices for new orders and shipments were down sharply. Additionally, manufacturers have also seemed to have drawn down on existing business as inventories and unfilled orders are also down. One of the key areas of weakness driving into the massive decline in the headline number this month was New Orders. Last month, this index came in at 33.6 which was the highest level since May of 2018 and the fourth-highest reading of all months of the current cycle. Now at -15.5, this is the lowest level since June of 2012 and the third-lowest reading of the current cycle. That 49.1 point decline month over month for new orders as well as the 49.4 point drop for the headline index are the largest monthly declines on record (chart below). That seems to suggest that the shock to demand and general conditions reported by the region's manufacturers has been more sharply negative than even any recessionary period in the past 52 years since the survey began. While it did not tip into negative territory, shipments are also down sharply, falling 25.2 points to 0.2. That is the fifth largest month-over-month decline on record for this category. This seems to further reinforce the idea that demand has weakened dramatically over the past month. Given the shutdowns that have taken place and the rise in jobless claims this week, it should come as no surprise that fewer businesses are taking on more workers and the length of the workweek is also being cut down. Considering social distancing has continued to be on the rise and businesses now seem to face a lack of demand, it will not be surprising to see these readings tip negative next month.
Sentiment Still Sour Thu, Mar 19, 2020 With the S&P 500 only having fallen roughly 1.3% since the last week's sentiment survey from AAII, bullish sentiment has risen 4.66 percentage points to 34.4%. While bullish sentiment among individual investors is higher, another reading of newsletter writers from Investors Intelligence saw bullish sentiment drop even further. 34.6% of respondents in that survey reported as bullish which is the lowest amount since the first week of last year. That is in the lowest 5% of all readings for that sentiment reading. With bullish sentiment picking up, bearish sentiment fell though not by much. Bearish sentiment remains very elevated. For the second week in a row, over half of the respondents reported as pessimistic. That is the first time with back to back readings above 50 since March 2009. The Investors Intelligence survey also remains extremely bearish. 32.7% of respondents in that survey reported as bears which is the highest share since the first week of 2019 when that reading totaled 34.6%. As for the AAII's reading on neutral sentiment, for only the 28th time in the survey's history going back to 1987, less than 15% are reporting neutral sentiment. Now at 14.5%, neutral sentiment is at its lowest level since November of 2010 when it had fallen to 13.95%.
Russell 2000's Third Largest Drawdown on Record Thu, Mar 19, 2020 While US large cap stocks are right around 30% from their record highs a month ago, the carnage in small caps has been even more severe. While the Russell 2000 never quite made a new high this year along with the broader market, it got pretty close. Like the rest of the market, though, it has been crushed. As of yesterday's close, the Russell 2000 was 43.1% below its all-time high which ranks as the third-largest decline from a record high. The only two periods where the Russell saw a larger decline were in October 2002 when the drawdown reached 46.1% and then in March 2009 when the selling finally stopped at 59.9% on March 9, 2009. Now, if the Russell 2000 were to match either of those prior two periods in terms of magnitude, it would have to fall an additional 4.3% to match the decline of October 2002 or 28.9% to match the decline of March 2009.
