From the desk of Willie Delwiche.
Key takeaway: Sentiment continues to argue a case for caution. Pessimism remains near historical lows. Nasdaq trading volume dwindles along with risk-seeking behavior. And with the economic surprise index slipping below zero, better than expected economic data no longer provides a tailwind. Yet, pockets of strength remain (including the earnings revision trend) and optimism has ticked higher across our sentiment indicators. Active investment managers have increased their exposure, throwing caution to the wind during a seasonally challenging period. All this does not lessen the real risks associated with the lopsided sentiment that tilts toward extended optimism.
Sentiment Report Chart of the Week: Analysts Still Playing Catch Up![](https://media-allstarcharts.s3.amazonaws.com/wp-content/uploads/2021/08/willie08112021.png)
The earnings revision uptrend has slowed its ascent in recent weeks, but it continues to move higher. Overall earnings expectations for 2021 have risen by nearly 20% since the beginning of the year (on average, earnings estimates are revised down 4% over the course of the year). Stocks tend to do well when earnings estimates are being revised higher and struggle when that tailwind fades.