Why Negative Sentiment is Positive

We just wanted to share a quick snippet to further explain some of the market sentiment and some extra insight. Headlines are most often more harsh than reality, so sometimes it’s nice to hear something with no political agenda. The market has been volatile the last few months and we have seen the market sentiment continue to get lower and lower among investors.

However, one interesting level to look at is the investor pessimism level has hit a level not seen since around the financial crisis. The red is where investors are overly pessimistic and when the blue line gets into this area this has historically been a great buying point 6 to 12 months out.

With this much pessimism, it doesn’t seem wise to follow the crowd and rush for the exits (like everyone seems to be doing). During these times it has historically paid to be a buyer during these times since market rebounds tend to be stronger and furious when stocks recover.  AKA buy low to later sell high.

While people seem to have become emotional about what has been happening in the market and economy sentiment has been a good leading indicator to market turnarounds. Right now, sentiment is leading in the buy direction.

Wishing you all a great weekend with some nice weather as we are heading into the holiday.

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