Consumer Sentiment Sector Rotation
In plain terms
The cited research finds the opposite of a momentum story: when consumer sentiment is unusually high (after stripping out the economy's fundamentals), small-cap stocks tend to do WORSE afterward. Our earlier version traded raw sentiment in the same direction as the trend, which does not match the research, so it was retired in June 2026.
How it works
Paper finding (Lemmon-Portniaguina 2006): the component of consumer sentiment ORTHOGONAL to macro fundamentals CONTRARIAN-predicts the cross-section; high residual sentiment forecasts LOW subsequent small-cap / low-institutional-ownership returns, captured as a small-minus-big spread at roughly quarterly horizons. This family instead implemented a pro-cyclical, per-ticker overlay on RAW UMCSENT (12m rolling z; long when z > +1 with a 60d own-name uptrend, short when z < -1 with a 60d downtrend), which is the opposite direction of and structurally different from the paper's effect. A 2026-06-04 empirical check found the contrarian sign holds only for small-caps at 21-63d and inverts at 126d and for large-caps, so no per-ticker sign flip is faithful; the family was retired (removed from the active generator registry, no-op in production). A faithful version would be a separate cross-sectional regime family on the orthogonalized sentiment residual (long small-minus-big when sentiment is low, ~quarterly hold) scored in the factor/pool lane.
Live results
0 times picked on its own · 32 times inside a blend (24 beat the stock) · updated 2026-06-06Data dependencies
- Daily prices
Adjusted-close OHLCV for every US-listed ticker; primary price feed.
- Fred macro
A data feed this strategy reads, refreshed on its normal schedule.
Expected edge
- Reported return
- ~1-1.5% quarterly on the contrarian small-minus-big leg (orthogonalized sentiment residual); direction is opposite to the implemented overlay
- Tested over
- 1956-2002 (Lemmon-Portniaguina)
Paper's 1-1.5% quarterly alpha applies to the CONTRARIAN small-minus-big leg on orthogonalized sentiment (Lemmon-Portniaguina 2006), not to the pro-cyclical per-ticker overlay this family implemented; no paper-backed edge estimate exists for the implemented rule.
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Explore Consumer Sentiment Sector Rotation on alphactor.ai
See which tickers this family is currently firing on, with live signals and rankings.