Investors are more optimistic than they have been for 17 years. The question is, does that bode well or ill for future stock performance? The last time optimism was so high was just when the bottom fell out of the market in 2000. Howard Gold explains in MarketWatch:
The latest Wells Fargo/Gallup Investor and Retirement Optimism Index hit 138 in September, its highest level in 17 years.
That was in September 2000, when investors still couldn’t shake their denial that the bull market of the 1990s was over.
It’s also a full 98 points higher than the 40 it registered in February 2016, when oil prices were crashing and many of us thought we were entering a new bear market. It hit a 20-year low of minus 64 during the depths of the financial crisis. Now, that was the time to buy!
What’s more, 68% of American investors said they were optimistic about the market’s performance over the next year. That matched the record high last reached in December 1999 and January 2000. Need I remind you what happened next?
In fact, a new record of 25% was “very optimistic” about stocks, Gallup reported. Gallup polled a random sample of 1,006 U.S. adults who had investable assets of $10,000 or more in late July and early August.
And the most optimistic investors of all? Retirees, who register an off-the-charts score of 158 points. Are these the same people who always say they’re confident they can retiree comfortably when they have saved 20,000 bucks in their IRAs?
Barometers of institutional sentiment show similar levels of optimism. Both Market Vane’s Bullish Consensus and Consensus Inc.’s bullish sentiment stand at 70%.
The American Association of Individual Investors’ (AAII) closely followed sentiment index also turned sharply bullish last week, when 41.3% reported being bullish about stocks, up from the mid-20% area. The percentage of bears dropped sharply. AAII members generally tend to be more active, sophisticated individual investors than the respondents to Gallup’s poll.
Read more here.
Jeremy Jones, CFA
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