Follow the Smart Money: How the Pros Are Trading Right Now

Author: Frank Holmes
Date Posted: May 7, 2015 Read time: 7 min

American Airlines CEO Bets his Paycheck on Company Stock

No matter what profession you’re in, no matter what sport or hobby is important to you, chances are good you keep track of what the top professionals are up to. More often than not, they’re the smartest ones in the room. They’re the innovators, the thought leaders, and it pays to keep up with their decisions, behavior and opinions.

This is especially true in investing.

Anyone can give you tips on how to get ahead in the market. Maybe you’ve even dispensed some sage advice to friends and family yourself over the years. No offense to you, your cousin or your neighbor, but before making any trading decisions, it’s usually constructive to first figure out where the smart money is headed.

But where do you go for such data? A good place to start is the bull/bear ratio.

Since 1987, Investors Intelligence has released such an indicator on a weekly basis that tracks the market sentiment of professional traders. High readings indicate bearishness; low readings, bullishness.

Currently, the ratio’s 52-week moving average stands at a record high of 3.5.

Bullishness Among Market Professionals Is Extremely High
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For the past decade and a half, this indicator has been more-or-less accurate at following the peaks and valleys of the S&P 500 Index. When the index plunged dramatically in 2008-2009 with the rest of the market, pro investors, motivated by cheap stocks and the huge potential for growth, became bullish.

The reverse is also true. The bull run we’re now in is six years old—one of the longest in U.S. history—and domestic equities are at record highs. What’s helped push the market higher this cycle are low interest rates and billions in dividends. For the first time last year, U.S. companies gave back $1 trillion to investors in stock buybacks and dividends, and even more is expected this year.

As a result, some top traders seem to be anticipating the next shoe to drop.

Market sentiment among Professional Investors vs. the S&P 500 Index
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So what does this mean? Of course, there’s no way to predict what will happen in the future with full certainty.

Having said that, it might be time to rebalance your portfolio by taking some profits from the best-performing assets and reallocating them into assets that are out of favor right now—or better yet, into a product that has a time-tested history of no drama. Research has shown that a systematic approach to asset allocation with regular rebalancing might lower your risk and enhance your returns.

For 20 consecutive years, our Near-Term Tax Free Fund (NEARX), which invests in short-term municipal bonds, has delivered positive total returns in both weak and strong economic climates, no matter if the pros are bearish or bullish.

Near-Term tax Free Fund Annual Total Return
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The fund holds four stars overall from Morningstar, among 179 Municipal National Short-Term funds as of 3/31/2015, based on risk-adjusted return.


Explore NEARX now!


Please consider carefully a fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.

Past performance does not guarantee future results.

Total Annualized Returns as of 03/31/2015
  One-Year Five-Year Ten-Year Gross Expense Ratio Expense Cap
Near-Term Tax Free Fund 2.38% 2.59% 3.10% 1.21% 0.45%

Expense ratio as stated in the most recent prospectus. The expense cap is a contractual limit through April 30, 2016, for the Near-Term Tax Free Fund, on total fund operating expenses (exclusive of acquired fund fees and expenses, extraordinary expenses, taxes, brokerage commissions and interest).Performance data quoted above is historical. Past performance is no guarantee of future results. Results reflect the reinvestment of dividends and other earnings. For a portion of periods, the fund had expense limitations, without which returns would have been lower. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Performance does not include the effect of any direct fees described in the fund’s prospectus which, if applicable, would lower your total returns. Performance quoted for periods of one year or less is cumulative and not annualized. Obtain performance data current to the most recent month-end at or 1-800-US-FUNDS.

Morningstar Rating


Morningstar ratings based on risk-adjusted return and number of funds
Category: Municipal National Short-term funds
Through: 3/31/2015

Morningstar Ratings are based on risk-adjusted return. The Morningstar Rating for a fund is derived from a weighted-average of the performance figures associated with its three-, five- and ten-year Morningstar Rating metrics. Past performance does not guarantee future results. For each fund with at least a three-year history, Morningstar calculates a Morningstar Rating based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund’s monthly performance (including the effects of sales charges, loads, and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. The top 10% of funds in each category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive 1 star. (Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages.)

Bond funds are subject to interest-rate risk; their value declines as interest rates rise. Though the Near-Term Tax Free Fund seeks minimal fluctuations in share price, it is subject to the risk that the credit quality of a portfolio holding could decline, as well as risk related to changes in the economic conditions of a state, region or issuer. These risks could cause the fund’s share price to decline. Tax-exempt income is federal income tax free. A portion of this income may be subject to state and local taxes and at times the alternative minimum tax. The Near-Term Tax Free Fund may invest up to 20% of its assets in securities that pay taxable interest. Income or fund distributions attributable to capital gains are usually subject to both state and federal income taxes.

The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies.

There is no guarantee that the issuers of any securities will declare dividends in the future or that, if declared, will remain at current levels or increase over time.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.