Earlier today, we brought you the following chart which certainly seems to suggest that “groupthink” has taken hold in markets – and “bigly”:
So according to Yale’s one-year investor confidence indices both the “smart” money and the “dumb” money are now 100% confident that nothing can go wrong (basically – the individual survey is at 98.92).
Well that prompted us to take a look at the “Crash Confidence Index, which as Yale explains, is “the percent of the population who attach little probability to a stock market crash in the next-six months.”
They clarify further: “The Crash Confidence Index is the percentage of respondents who think that the probability is less than 10%.”
Ok, so it turns out the latest reading on that for institutions is 29.55%. Or, put differently, less than 1/3 of institutional respondents are willing to say that the risk of a stock market crash is less than 10%.
Meanwhile, the cost of protecting against a crash remains elevated after hitting an all-time high in March.
So let me get this straight…
100% of institutional respondents gave a number greater than zero when asked how much of a change in percentage terms they expect for the Dow in 1-year, but only 29.55% were willing to say that the chances of a “catastrophic stock market crash in the U.S., like that of October 28, 1929 or October 19, 1987, in the next six months” was less than 10%.
And meanwhile, the cost of protecting against just such a “catastrophic stock market crash” remains elevated.
Something doesn’t add up there.