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Smart Money Index is a Concern
However, lurking among our technical indicators is one metric that is painting a dramatically dour picture. Better characterized a spice rather than a key ingredient in the outlook mix, the Smart Money Index (SMI) takes the first half hour of trading, which is dominated by retail investors (“dumb money”), reverses its sign and adds it to the last half hour of trading, which is typically dominated by institutional investors (“smart money”). SMI has been a good predictor of market turns.
The Smart Money Index turned downward as early as June 2008, long before the September market swoon, and bottomed in October of that year, five months before the S&P rebounded. After reaching an all-time high in tandem with most equity markets at the beginning of 2018, the SMI has plunged more than 18 per cent since then, far more than the S&P’s 7 per cent retreat. Is Smart Money suggesting more pain in our future? For now, we’ll continue to watch Smart Money in combinations with our other more established metrics.
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About Cresset
Cresset is an independent, award-winning multi-family office and private investment firm with more than $40 billion in assets under management (as of 7/13/2023). Cresset serves the unique needs of entrepreneurs, CEO founders, wealth creators, executives, and partners, as well as high-net-worth and multi-generational families. Our goal is to deliver a new paradigm for wealth management, giving you time to pursue what matters to you most.
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