6 October 2025
New this week: we’ve added some more indicators across assets and have harmonised the calculations of the Sentiment Matters Aggregates (SMAs). Hope you like it.
Top 3 This Week
- Bullish, but stable— sentiment is the most positive since December, but not yet extreme.
- Tech dominates sector sentiment - Utilities were the only other sector with net bullish sentiment, but slipping.
- Health Care rebounds: sentiment improves after the Pfizer bounce, but remains net bearish.
Sentiment Overview
- Like equity markets, sentiment has been grinding higher slowly.
- Unlike equity markets and valuations, sentiment is not near all-time highs.
- Our Heatmap reached another year-to-date high in bullishness, now at the 64th percentile, a 10-month high. That’s just shy of the 2024 peak (66) and still below the historical sell threshold of 73. Historically, this zone has meant below-average equity returns over the next 12 months.
- Indicator changes this week: 36 in a bullish sentiment direction vs. 21 bearish.
- AAII Sentiment Survey: Creeping slightly more bullish, but still neutral overall. No clear signal and still an outlier.
- AAII Asset Allocation Survey (monthly): Cash allocations dropped to 15.4%, the lowest in 16 months (and second lowest since 2022), but still slightly above the sell threshold. Only marginal changes to equity and bond weights.
- Hedge Funds: Mixed. Macro Hedge Fund Betas remain at 7-year highs, but other strategies (Absolute Return, Market Directional, Multi-Strat) are near neutral around the 50th percentile.
- Money Market Funds: Strong institutional inflows. Month-on-month flows are at the 94th percentile, close to a buy signal. I score this indicator 1.5/3 so it should not be ignored. But it remains an outlier versus broader sentiment measures.
- Heatmap extremes: Of 55 indicators, 12 are at/above the 90th percentile, 6 at/below the 10th. Three of the six are policy uncertainty indicators, which historically have weak predictive power.