Investors Have Only Been More Bearish Once This Century By Brett Eversole
No one sees opportunity in today's market... nobody. Bearish sentiment readings have been stacking up in recent months. Mom-and-pop investors are scared. Professionals are scared. Everyone seems hopeless. That's good news for us contrarians, though... because we know tough times set the stage for incredible returns. You see, these fearful sentiment readings tend to pile up near market bottoms – right before stocks soar. We're seeing it happen again right now. One group of professional investors is the most bearish it has been in three years. In fact, it's the second-worst reading for this measure on record. Similar setups have led to 17% gains over the following year. That means the bottom could be near... with big gains on the way. Let me explain... Barron's magazine has been a staple of the financial world for more than a century. It manages to bridge the gap between financial pros and retail investors... The pro reader gets great insights, while the individual investor isn't left feeling overwhelmed. Importantly, the magazine has been tracking its own sentiment survey for more than two decades... The biannual Barron's Big Money poll asks institutional investors how they feel about the market. Much like the American Association of Individual Investors Sentiment Survey I discussed recently, the Big Money poll asks those pros if they're bullish, bearish, or neutral. The most recent results came out last month. And just as you'd expect, pessimism sits near a record high. Take a look... The most recent poll showed that 30% of the surveyed pros are bearish on the market today. That's up big from earlier this year. And it's the second-highest reading on record. These results make sense. Everyone is scared right now. But importantly, the current level tells us the end of this bear market could be near. We've only seen four other bearish readings greater than 25% since the data began in the 1990s. And in each case, it was a good time to buy stocks. Take a look... This century hasn't been the greatest for stock market returns. The market is up just 4% a year since 2000. But you can dramatically outperform if you buy when the Big Money poll hits these levels. Similar instances led to 3.9% gains in three months, 5.5% gains in six months, and 16.8% gains over the next year. Not only is that massive outperformance, but it's darn impressive in its own right. The sample size is small. But in each of the four cases, stocks were higher a year later. So while the bottom might not be in yet, history suggests it's getting closer. And if you can hold on for a year, gains are a near certainty. Good investing, Brett Eversole Further Reading "Before you make a big, emotional move in your portfolio, you must have a specific plan for how and when you'll get back into stocks," Brett writes. After the 2008 bust, a lot of money never returned to the markets – and investors missed out on huge gains... Read more here. "Drawdowns in stocks happen," Dr. David Eifrig writes. "Don't fool yourself into thinking you can avoid all of them when they hit." We'll likely see more volatility from here. And you need a plan to navigate it – without selling at every dip... Learn more here. |
Market Notes HIGHS AND LOWS NEW HIGHS OF NOTE LAST WEEK Humana (HUM)... health insurance
McKesson (MCK)... health care giant
Gilead Sciences (GILD)... biotechnology
Neurocrine Biosciences (NBIX)... prescription drugs
Hostess Brands (TWNK)... snack cakes
e.l.f. Beauty (ELF)... cosmetics
Harley-Davidson (HOG)... motorcycles
W.W. Grainger (GWW)... industrial supplies
ExxonMobil (XOM)... oil and gas
Chevron (CVX)... oil and gas
ConocoPhillips (COP)... oil and gas
Texas Pacific Land (TPL)... oil and gas land royalties
First Solar (FSLR)... solar energy NEW LOWS OF NOTE LAST WEEK Microsoft (MSFT)... tech giant
Alphabet (GOOGL)... tech "World Dominator"
Amazon (AMZN)... online-retail king
Meta Platforms (META)... social media giant
Fidelity National Information Services (FIS)... financial technology
Fortinet (FTNT)... cybersecurity
Taiwan Semiconductor Manufacturing (TSM)... semiconductors
Qualcomm (QCOM)... semiconductors
Zoetis (ZTS)... pharmaceuticals
Edwards Lifesciences (EW)... medical devices
Align Technology (ALGN)... Invisalign
Mohawk Industries (MHK)... flooring
Public Storage (PSA)... self-storage REIT
Ecolab (ECL)... sanitation technology
Newmont (NEM)... gold
Barrick Gold (GOLD)... gold
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