Survey Says: Feelings Are a Bad Predictor of the Stock Market

Today I came across this headline from the American Association of Individual Investors:

AAII Sentiment Survey: Optimism Above Average for Sixth Consecutive Week

I guess people are feeling moderately good about investing this week.

The problem is, these surveys are mostly useless, and bordering on being contra-indicators: Most people are pretty bad at predicting where markets are headed (Google “Can you time the stock market?" for endless references).

Anyways, I was reminded of the time in late September (within 2 weeks of the market’s final bottoming in 2022), that bearish sentiment topped 60% for the first time since the financial crisis. I wrote about it HERE.

People were scared. Inflation, interest rates, indicators, oh my!

Anyways, the stock market is up about 20% since then. Funny how that works.

S&P 500 screengrab from Yahoo Finance 7/14/2023

This is the part where you might expect the sign-off to include a Warren Buffett quote about being greedy when others are fearful. Or maybe something more along the lines of John Templeton’s “Buy when there’s blood in the streets”. We’ll skip that today.

I don’t have a strong opinion on where the market is headed in 6 months. That’s ok. It probably wouldn’t make a huge difference either way. I’m holding shares of great companies (aka stocks) for decades, not days, and most of our clients are too.

If you can keep your head, when all about you are losing theirs…

Yours is the Earth and everything that’s in it

- Rudyard Kipling “If”