(Bloomberg) — The VIX is at 20, stocks are on the brink of their worst October in five years, and every other day the bond market throws a fit.
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For equity bulls conditioned to dive in at any sign of weakness, it’s getting to be too much. Across investor categories, they’re pulling money out and hardening a posture that is by some measures the most defensive in over a year.
Surveys of professional managers show big-money allocators have cut their equities to levels last seen at the depths of the 2022 bear market. Hedge funds just pushed up single-stock shorts for an 11th straight week. Models of investor positioning show everyone from mutual funds to systematic quants reducing equity exposure well below long-term averages.
Among trading sins, few are as unanimously pilloried as market timing, but that doesn’t keep it from happening in times of stress. Whether the latest exodus is the precursor to a rebound or a protracted period of pain is the big question heading into November.
“It’s troubling that a market setback as internally deep as the current one hasn’t resulted in more improvement” in sentiment, said Doug Ramsey, chief investment officer at the Leuthold Group. “The ‘wall of worry’ accompanying much of the 2023 market action has morphed into a ‘slope of hope.”’
Dip buyers are hard to find, with the S&P 500 falling more than 1% five different times in October and pushing the index into a correction on Friday. A gauge of projected price swings in the Nasdaq 100 Index hovers near the highest level since March. Even after tech finally caught a break Friday on solid earnings from Amazon.com Inc. and Intel Corp., the Nasdaq 100 closed out the worst two-week drop this year and is poised for its steepest October loss since 2018.
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A poll by the National Association of Active Investment Managers shows money managers rolling back in exposures to October 2022 levels. Equity positioning has fallen below long-term averages for most investor categories, particularly hedge funds and mutual funds, according to…
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