Investor sentiment is the view of the market by investors. This is the combined view of all investors at any one time. Since this is not static, but rather always changing, investor sentiment is usually seen in three general categories: extremely optimistic (bullish); extremely pessimistic (bearish); and neutral or equal in number of optimists and pessimists. The view of investor participants can be based on either fundamental or technical reasons. Investor sentiment is seen as moving the main indices, which will push individual stocks in its wake. For example, a company might not be a great stock, but if the investor sentiment for the overall index is extremely bullish, this optimism will push up the price of most, if not all, stocks. Many view extreme market sentiment readings as a contrary indicator; when most people are bullish (optimistic), the market is close to a short-term top and vice versa.
Investor Sentiment was last modified: June 5th, 2012 by admin
The late Sir John Templeton said it best when he explained investors’ emotions at major turning points in stock market cycles. He said, “Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria.”
Investor Euphoria So Strong, There’s No Fear!
Below is a chart of the Chicago Board Options .
The stock market continues to be mediocre. Economic data from abroad isn’t particularly inspiring. Investors are likely to yawn at first-quarter earnings season results this year as they did with earnings for the fourth quarter of 2014.
If there is an overarching theme to the stock market’s action this year, it’s that the Federal.
It looks like large-cap technology stocks, especially those related to online businesses, are experiencing a slowing down of what’s traditionally been some very solid growth.
Amazon.com, Inc. (AMZN), Netflix, Inc. (NFLX), LinkedIn Corporation (LNKD), and Groupon, Inc. (GRPN) have all been under pressure.
Many pure-play online.
Even with the recent price retrenchment, there’s not a lot of value circulating in this stock market. Everything’s already gone up and the capital gains have been great the last few years. But it’s still a slow-growth environment in the global economy, and despite a very accommodative monetary policy, stocks can’t go up forever.
Amid all the turmoil in capital markets, I’m reminded of all the good corporate earnings being released.
Of course, the stock market is a system of discounting future business conditions and the recent sell-off has been pronounced, but stocks have come so far over the last several years. If the catalysts were deflationary pressures.
Immediate term outlook:
The bear market rally in stocks that started in March 2009, extended because of unprecedented central bank money printing, is coming to an end. Gold bullion is up $1,000 an ounce since we first recommended it in 2002 and we are still bullish on the physical metal.
Short-to-medium term outlook:
World economies are entering their slowest growth period since 2009. The Chinese economy grew last year at its slowest pace in 24 years. Japan is in recession. The eurozone is in depression. With almost half the S&P 500 companies deriving revenue outside the U.S., slower world economic growth will negatively impact revenue and earnings growth of American companies. Domestically, America’s gross domestic product grew by only a meager 2.3% in the second quarter, which will negatively impact an already overpriced equity market.