Main Street investors are not alone in their “crowd” behavior. It actually permeates most of the investment world, including the professionals.
The evidence shows that investment professionals herd like most everyone else.
The current reading of 106.41 in the National Association of Active Investment Managers Exposure Index is compatible with the extreme readings in the Survey. A 100 reading in the Exposure Index means that active managers are fully invested in equities. The current level of 106.41 means managers are more than fully invested; they are leveraged.
Professional investors herd like all investors. They become more optimistic as stocks rally and more pessimistic as stocks decline. When the stance of active investment managers reaches an extreme, it’s usually a sign that a trend reversal is just around the corner.