Many look at the chart below and quickly identify that the percentage of people responding to the Bloomberg's Conference Board’s “Consumer Confidence Survey” who believe stocks will rise over the next 12 months is at an all-time high. The chart certainly illustrates that more than half of respondents believe the market will be higher over the next 12 months. However, I question if that should be the proper takeaway.
What strikes me as most interesting is that throughout the survey’s nearly thirty-eight-year history, such a low percentage of investors believed the stock market would be higher over the subsequent 12-month period. The chart would suggest that the stock market’s odds of producing gains are rarely any better than a coin flip. It illustrates the cynical view many have of the stock market, likening it to a casino. Consider that the S&P 500 year-to-date is up by over 25% as of December 17th. With fourteen trading days remaining in 2024, it would take an extraordinarily historic turn of events for the market to end the year with a negative total return.
Let us assume then that the data history is a full 38 years. Over this span there have been seven calendar years in which the S&P 500 produced a negative total return. In fact, the S&P 500 has risen in 82% of calendar years since 1987. Yet rarely even 50% of survey respondents are bullish. My primary takeaway is that people are poor forecasters and find it easier to allow uncertainty and negative outlooks to influence their investment views.
I will concede public optimism is not necessarily a market buying indicator. However, it is clear to me that it is not necessarily a contrarian sell indicator either. There appears to be no correlation in the survey between relative market optimism and market declines. It does appear that poor investment sentiment has shown good buying opportunities. A savvy investor once advised me that every great investment begins in discomfort. This appears especially apt when market pessimism is high.
The yearend brings a flurry of reports and analyses containing forecasts for the next year. Many investment analysts will evaluate and incorporate the Conference Board’s survey into their investment outlooks and forecasts. My primary takeaways are that the public has historically taken an overly pessimistic view of future market returns and made overly pessimistic market forecasts. These surveys and forecasts will not alter or unduly influence our thinking. We form a long-term strategic investment plan to help you achieve your financial goals. Do not allow emotion or sentiment to lead you to deviate from your investment objectives. It will likely result in lower total returns and failure to achieve your financial goals. We understand market uncertainty can lead to you feeling anxious about your investment allocation. Please feel free to contact your private wealth manager, Tom, or me to discuss your investments or any concerns you may have concerning your financial plan.
Best,
Kevin Curran
Co-CEO & Chief Investment Officer
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