U.S. retail investor optimism is on the rise, although this may indicate that it’s time to get cautious on stocks, it suggests National Bank Financial (NBF).
In a research note, NBF says that newly released data shows that equity mutual funds recorded net inflows for the third consecutive week, but that exchange-traded funds (ETFs) had net outflows of $3.1 billion from U.S. stocks-related products during the week.
“The ETF and mutual fund data suggest a divergence of attitude between institutional investors (ETF data) and retail investors (mutual funds),” it says.
Additionally, NBF says that an investor sentiment survey reveals that individual investors were at their most bullish in two years last week.
“The percentage of investors reporting to be optimistic for the next six months stands at 52.3%, more than one standard deviation above the historical average of 39%,” it reports.
“From a contrarian standpoint, this development argues for a period of consolidation given that the S&P 500 is already up more than 5.3% this month, and closed above 1,500 last week for the first time since the onset of the recession,” it says.