A Different Way to Measure Investor Sentiment

By on July 21, 2009

Brett Steenbarger, editor of the TraderFeed blog, has exposed an alternate way to determine investor sentiment. Basically he compares the relative performance of junk bonds (SPDR Barclays Capital High Yield Bond; JNK) versus higher rated corporate debt (iShares iBoxx $ Invest Grade Corp Bond; LQD).

JNK outperforming LQD signifies investors are more bullish about the prospects for the economy. Using this as a contrary indicator means investors should allocate a higher percentage of their portfolios to equities when JNK is severely underperforming LQD; as it did the first week of March 2009.



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