Discussing Investor Sentiment and a Potential Relief Rally During a Bear Market
May 31, 2022
Welcome to Wealth Enhancement & Preservation’s Market Minute, where we get to update you on everything that happened in the financial markets this week. My name is Darrin Cohen, and I am the CEO of Wealth E&P.
We’ve some great news to report this week, with all three major indices up over 6% as we went into the holiday weekend last week. Now, the question is: is this a sign of good things to come, or is this simply a bear market rally?
Let's take a look at this information below from the American Association of Individual Investors. They survey investors and ask them: “Do you think we're in bullish times or are you more pessimistic and think we're in a bearish territory?” Now, you would expect that the higher that number, the more optimistic investors there are, the better the markets would do, and vice versa.
However, you can see on the far left in the above chart that when less than 20% of investors believe we're in bullish territory, the market actually performs the best. Looking at the opposite sentiment, the more optimistic they are, the worse the markets perform. Right now, we stand at about 16 of investors believing we're in bullish territory. This is the fourth-lowest in history; the last time we were this low was at the beginning of 2009, right when the markets were at their lowest and began a huge rally. Now, there is no way to promise that this will continue going forward, but we certainly hope so.
We'll update you as it changes, and we will keep you in the loop on how the markets are doing and what we're seeing. Of course, we'll make changes in our portfolios as necessary! If you have any other questions about this topic, if you want a risk profile, or if you would like a retirement projection, please feel free to reach out, visit www.wealthep.com, or give us a call at (678)-739-0175. Otherwise, stay tuned for our Market Minute next week!
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
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