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Hedging is So…Last Year…

By John Del Vecchio and Brad Lamensdorf

Hedging is dead.

As the markets climb higher, investors have abandoned protecting their portfolios.

One of the clearest examples is from the Equity Hedging Index (EHI) calculated by SentimenTrader.com

The EHI measures the activity across numerous ways that investors can hedge their portfolios. The more heavily hedged investors are, the higher the index and vice versa

It’s a contrary indication. Today it’s hitting extreme lows.

As the chart below shows, the EHI has dipped below 10.

Hedging is So…Last Year…
Hedging is So…Last Year…

Why is a reading below 10 important?

Well, there have only been nine other weeks over the last 20 years that the EHI has been this low.

All of them preceded weak medium to long-term returns.

Of course, with everyone leaning in one direction (bullish) and with no protection (few hedges), what possibly could go wrong?

A lot.

Most investors are wrong most of the time.

It’s the extremes like we see today where the best opportunities for profit lie.

Time to buy some insurance.

To learn more about how these indicators can help manage risk in your portfolio, book a call with Brad.

You may book a call here.

 

 

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