Why the Public Is Always Wrong About the Stock Market
Monday, April 28th, 2008
By Michael Lombardi, MBA for Profit Confidential
Most of the newspapers we will read today will carry a “startling” story in their business sections about consumer confidence.
According to a Reuters and University of Michigan Survey of Consumers, consumer confidence in the U.S. fell in April for the third straight month. Most startling, consumer confidence is now at its lowest level in 26 years. We have to go back to March 1982, a time of extremely high inflation and interest rates, to see consumer confidence worse than what it is now.
What caught my attention about the report was the fact that nine in 10 consumers thought that the U.S. economy was in a recession at this time. The report also mentioned that never before had so many consumers heard so much poor economic news.
As a long-time market participant, it’s almost comical for me to see history repeating itself over and over again. What am I talking about?
When I predicted in mid-2007 that we would be in a recession in the U.S. by the first quarter of 2008, I was the only market forecaster making that call. In fact, back then, before the subprime mess became a banking crisis, the average American had no idea that times would get so difficult economically.
Today, it is the opposite: I’ve never seen such a well-publicized and well-known recession. The mood about the U.S. economy amongst Americans is down and outright grossly negative… they have the worse economic outlook for their country I have ever seen. But when the masses believe that the economy is going one way, it usually goes the other.
And you can see it in the stock market. While U.S consumer confidence sits at a 26-year low, the Dow Jones Industrial Average has risen an astonishing 1,383 points since mid-January 2008. Yes, while everyone is worried about the economy, the world’s most watched stock market is up 12% in just over three months.
While I follow the bad news like everyone else, the stock market is telling us that the public is wrong about the economy, as proven by rising stock prices. The public was wrong about the economy back in March 1982 because the economy just got better from there. And I truly believe that the public is wrong about the economy today. The stock market seems to have already discounted the worse ahead for the economy.
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Michael bought his first stock when he was 17 years old. He quickly saw $2,000 of savings from summer jobs turn into $1,000. Determined not to lose money again on a stock, Michael started researching the market intensely, reading every book he could find on the topic and taking every course he could afford. It didn’t take long for Michael to start making money with stocks, and that led Michael to launch a newsletter on the stock market. Today, Michael only employs the top market analysts and editors. Some of our recommendations have posted gains in excess of 500%! Michael has authored and published over one thousand articles on investment and money management. Along the way to building Lombardi Publishing Corporation, now with over one million customers in 141 countries, Michael became an active investor in real estate, art, precious metals and various businesses. Readers of the daily Profit Confidential e-letter are offered the benefit of the expertise Michael has gained in these sectors. Michael believes in successful stock picking as an important wealth accumulation tool. Married with two children, Michael received his Chartered Financial Planner designation from the Financial Planners Standards Council of Canada and his MBA from the Graduate Business School, Heriot-Watt University, Edinburgh, Scotland.Follow Michael and the latest from Profit Confidential on Twitter
