First buy signal by investor indicator since French elections

Royal London Asset Management’s (RLAM) composite sentiment indicator has shown its first buy signal since the French elections in April.

The composite indicator is a proprietary model looking at market and investor behaviour.

Analysis using the indicator suggests it is generally a good idea to buy stocks when the indicator gets to a reading of -1 or lower.

The indicator measures market investor behaviour in terms of:

  • Price momentum – equity markets tend to bounce after a short-term drop;
  • Volatility – increased uncertainty can create good buying opportunities;
  • Retail investors – excessive bearishness can set the scene for a market rally;
  • Company directors – company directors tend to buy shares in their own companies when the market is too depressed; 

Trevor Greetham, head of multi-asset at RLAM, said: “After months of calm investors are starting to get rattled by geopolitical events with the standoff with North Korea and large-scale protests in the US causing some disquiet.

“It pays to buy when others are fearful and we are starting to add to the equity positions in our multi-asset funds, increasing our overweight positions there.”

©2017 funds europe

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