According to Jim Paulsen, chief investment strategist at The Leuthold Group, some investors are betting on more value-creating stocks, but the end of the rout may be closer than it looks.
In his post, Paulsen said that one of the most striking aspects surrounding the emergence of a post-pandemic bull market and a recent bear market is without confidence that it will rise significantly, at least on either Main Street or Wall Street. Said that both happened.Last 62 years
“Convicted on both main streets & Wall Street is now less than about 94% of the time since 1960. Bears are gone, so you don’t have to “check” your optimism.
“Historically, when self-confidence was so low, bears were about to expire, with an average year ahead of S.&The return on the P 500 was more than + 20%. Based on today’s very negative sentiment when compared to historical norms, the stock market is traditionally in the area where Bears die … and … bulls come out to play. “
Paulsen argues that the post-pandemic era stands alone as the most “pessimistic” bull market to date.
“Despite the economic recovery and bullish markets, main street confidence has been below the 50th percentile since 2020. Similarly, since 2020, the VIX volatility index (investor concern) has been above the 50th percentile. ..
“In a way that wasn’t seen in 1960, stock market volatility has risen chronically and main street negatives have continued. In fact, consumer confidence since 2020. Feelings are most often below 30%, but VIX volatility is above 70% on the index. With these measures, it was a unique period of chronic pessimism. “
Paulsen said the bear market would die if emotions became overly pessimistic, as “fear of the coming” was so serious.
“Is it really possible to get worse because I’m less confident? For example, if you’re hoping for the end of the world, it’s hard to overcome that degree of fear. Second, today’s excessive pessimism and history. Given the norms, it seems much more likely to decrease than to be the same or worse. “
