I think you misunderstood my sentiment. I am not waiting for the average investor to re invest his capital. When I talk about the average investor I'm not talking about people who are responding to investment surveys. Or, in general, are even capable of responding to these kind of surveys. I'm talking about my mother, my friends, family, and other random people. The negative sentiment is overpowering. My mother doesn't know a thing about the economy, and yet she knows she doesn't want to risk her retirement in the stock market again. This is more of a sampling of uneducated money as opposed to a survey of "investors". However, while these players have stayed out money has been flowing in from across the oceans as Europe and Asia buy American stock. Another thing I wanted to talk about was this supposed endless bullish optimism. I just don't know what youare talking about. All I see on this board is one EotW scenario after another. Where is the optimism? I come on here with a positive outlook and I am outnumbered at least 3 to 1. If anything there is still far too much bearish sentiment in the air. IMO the market started pricing in a double dip around mid may last year. So if the market priced in a drop and the drop never came, what happens next? I think the economy is going to grow and things are going to get better. Just my outlook, barring any black swan 9/11 type event.
Hi, bkveen3. I guess I'm not sure that what we sense around us is the best measure of market sentiment, but I understand what you are sensing. Anecdotally, I also know people who say they won't touch stocks, but I think that is to be expected given the lingering difficulties of this economic environment. It should be no surprise to find bears in a difficult climate. The question in a bearish environment is whether or not bearishness is extreme enough to be at the point of ridiculous, irrational fear. A tour of the results of respected studies (surveys) reveals that investors, investment advisors, traders and mutual fund managers all expect bullish market behavior ahead -- surprisingly strongly so. As is stated on InvestorsIntelligence.com, these surveys are "a contrary indicatorââ¬Â¦but only at extremes." A contrarian point of view would be to expect at least a somewhat opposite reality when extremes are seen. If you think that contrarianism is baloney, then ignore this post. The American Association of Individual Investors (John Q Public Investor), the Daily Sentiment Index (a survey of traders) and the Investor's Intelligence Poll (investment advisors) all uniformly show strong bullish expectations. I'm not just talking about mild bullishness. This is what I've learned about these surveys recently: (Please note that I am not a subscriber to these individual surveys. I am only drawing my conclusions based on what I've heard/read casually about these surveys from other analytical sources that I follow and accept, including some personal contacts. I'm just an interested enthusiast. Therefore, take it as food for thought and draw your own conclusions. I continue to be interested in hearing what you and others in this forum conclude.) The AAII poll, I've learned, is usually quite skeptical. A bullish plurality in this poll can be enough to set a contrarian opposite expectation. The recent results have clearly now registered on the bullish side, sporting a very strong bullish majority. The same is true of the II survey. The two surveys combined show that investors and their advisors together recently became bullish to the tune of a six year extreme. As recently as November, the DSI survey matched the bullish levels last seen as the DJIA was making its run to an all-time high. Yet, the indexes are still significantly below those price levels. And mutual funds have maintained a very low cash position since setting a record low cash position last summer at just under 3.5%. There is a pervasive belief that while the recovery may be tough it is still well established and certain. Since the markets have already rallied significantly, bouncing strongly from the early 2009 financial crisis lows, it's hard for me to imagine a new bull market sparking amid these recorded extremes in optimism and lasting very far into the new year. None of this necessarily spells economic doomsday, either. However, given the long run-up since the financial crisis and the ugly fiscal condition of the world economies, I'm inclined to not be so bullish. In fact, I'll admit it; I'm inclined to be bearish for the year ahead. I'd love to be wrong. In my opinion, we could get something protracted to the downside again to retrace much of the "recovery" rally and potentially even retest the lows. Or, maybe we'll just get something grinding and lackluster to wear down this sentiment. Either way, I'm not too bullish. If the sentiment of these surveys matched something closer to the sense of pessimism you perceive around you, then that would make more sense to me. The proverbial "wall of worry" would be in place. I just don't see that in the sentiment measures.