by Dave Kranzler, Investment Research Dynamics:

The following commentary is from the latest issue of the Short Seller’s Journal. SSJ analyzes economic developments and presents fundamentally-driven short-sell ideas on a weekly basis. You can learn about this newsletter here: Short Seller’s Journal information.

A massive disconnect between consumer sentiment and the retail stock allocation has developed. The graphic below (allstarcharts.com) shows the U of Michigan Consumer Sentiment index (blue line, left y-axis) and the AAII (American Association of Individual Investors) equity exposure (orange line, right y-axis) going back to 1990. The two metrics have been highly correlated up until the stock market took off after March 2020.