Here's one way of putting the equity market rally in long-term perspective. By this measure, equities on average gain almost 7% a year (plus dividends), and they have plenty of room left on the upside. The market was way too optimistic in 2000, but now appears to be right in the middle of its historic range.
Why do you think everyone is so pessimistic? AAII today was 46% bulls vs. 26% bears. VIX at 6-year low. C'mon.
ReplyDeleteGloeschi said "Why do you think everyone is so pessimistic? AAII today was 46% bulls vs. 26% bears. VIX at 6-year low. C'mon."
ReplyDeleteGloeschi you might look at the rest of the information on the AAII webpage which you quote, such as:
Change from last week:
Bullish: +7.7
Neutral: +1.5
Bearish: -9.3
Long-Term Average:
Bullish: 39.0%
Neutral: 30.5%
Bearish: 30.5%
You can see that this apparent "bullishness" is only a one week phenomena. I follow this sentiment indicator weekly and only a few weeks ago there were more bears than bulls. Personally the % Bulls would have to get to 65% or so before I would become worried.
Furthermore, if you correlate AAII with the LIPPER FUND FLOW REPORT, you will note the following:
Monthly November 12/21/2012 Equity Fund Outflows -$7.5 Bil;
Taxable Bond Fund Inflows $19 Bil
xETFs - Equity Fund Outflows -$14.4 Bil;
Taxable Bond Fund Inflows $16.9 Bil
Weekly 12/19/2012 Equity Fund Outflows -$583 Mil;
Taxable Bond Fund Outflows -$1.6 Bil
xETFs - Equity Fund Outflows -$6.4 Bil;
Taxable Bond Fund Inflows $9 Mil
Weekly 12/26/2012Equity Fund Inflows $3 Bil;
Taxable Bond Fund Inflows $936 Mil
xETFs - Equity Fund Inflows $508 Mil;
Taxable Bond Fund Inflows $1.8 Bil
Weekly 01/02/2013 Equity Fund Inflows $3.6 Bil;
Taxable Bond Fund Outflows -$331 Mil
xETFs - Equity Fund Outflows -$3.6 Bil;
Taxable Bond Fund Inflows $82 Mil
Weekly
Weekly 01/09/2013 Equity Fund Inflows $18.3 Bil;
Taxable Bond Fund Inflows $4.2 Bil
xETFs - Equity Fund Inflows $7.5 Bil;
Taxable Bond Fund Inflows $5.4 Bil
Thus, there have been net inflows into equity mutual funds and ETFs for ONLY three weeks.
ECRI Weekly Leading Indicator Rises
ReplyDeleteA measure of future U.S. economic growth strengthened in the latest week to its highest in a year and a half, while the annualized growth rate edged up.
The Economic Cycle Research Institute said its Weekly Leading Index rose to 128.3 in the week ended Jan. 4, its best showing since August 2011, from a revised 126.6 the previous week.
The index's annualized growth rate was 5.1 percent compared with 5.0 percent a week earlier.
NOTE: Some researchers have found that the ECRI Weekly Leading Indicator is highly correlated with the S&P 500 and may lead the economy just the stock market does.