Trigger goes hereExtremes of investor sentiment, whether bullish or bearish, have proven to be a valuable tool for identifying periods with a high probability of major trend changes.

Indeed, one of the most reliably profitable strategies through time has been to adopt an investment position counter to these extremes of crowd behaviour. It is not practiced often because it is psychologically demanding. Human beings have exhibited a strong tendency to adapt their behaviour to consensus thought through history.

The rate of margin debt increases, or declines. is a better measure than total margin debt levels because it best captures changes of sentiment over a given period. Therefore, in our opinion, it is the best measure of investor sentiment. However, no single measure should be used to make investment decisions. They
should be used with other investment techniques to provide the proper context on which to base actions.

The chart illustrates that the recent growth in margin debt has reached levels previously seen before the collapse of the internet bubble and the 2008 Financial Crisis which supports our view that the current risk/reward prospects offered by equity markets are currently poor.

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