How Bullish is the Investing Public?

We previously mentioned how Bullish the Pros were; What about the investing public — how Bullish are they?

At least when measurd by a particular sub group — over 5,000 online WSJ readers — the answer is "Very" :


click for larger graphic
via WSJ


While I see a lot of anecdotal chatter about this, and prefer to stick with more quantitative data. Too many people say “All my colleagues/friends/brother-in-laws are _____. That’s meaningless.

The Business Week survey reveals one group of bullishness (Strategists). When I made my guess, I never figured I would be the outlier to the downside. Without thinking much about it, I assumed I would be in the bottom third, or even quartile.

Silly me.

Other surveys reveal a similar Bullish bend. The WSJ poll (over 3,750 people) show 46% expect the same thing as the market gurus: between 11-12k. Another 12% think we end up at more that 12,000. About 22% expect to end 2006 unchanged. Only 9% think we will see the Dow between 10,000-10,500 – a mild correction of less than 10%. A little more than one in 10 persons (11%) think the Dow will drop below 10,000.

The one anecdote I will mention is television bookings:  Why is it I see the same few Bears on CNBC? The bookers I speak with tell me there are far fewer Bulls than Bears.


Bottom line: Both the pros and the amateurs are moderately Bullish.


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What's been said:

Discussions found on the web:
  1. Jos Theelen commented on Jan 2

    The next question is whether the pro’s and the amateurs are right. How often have their forecast been right in the past?

  2. royce commented on Jan 2

    Betting that the Dow breaks 12,000 has become a January tradition over the past 5 years. It’s a safer bet than being a bear, since typically bullish folk can point to some unforseeable event during the year that “stopped it from going where it was headed.” Compare that with predicting a huge drop that doesn’t happen, a bad call that other analysts hold over the bear’s head for years.

    Plus, the retail side of Wall Street is in the business of selling stocks and mutual funds, and people won’t want to buy their wares if all the experts are calling a big drop. Because most of the experts ultimately owe their livings to the existence of a big, active market, there’s going to be a huge bias towards bullishness each January.

  3. Bob Balestri commented on Jan 2

    I guess I need to re-read Bull! To me, the word “think” implies some underlying (semi-) rational process and I guess I would like to see a survey that captures why people think what they purport to “think”. Maybe hope would be a better word. As for the lack of Bears on the boob tube, re-read Bull! Bears don’t capture eyeballs.

  4. j commented on Jan 2

    WSJ readers are a bullish population, not a sample indicative of public sentiment. Would be interesting to see what % of investing population is leaving stocks.

  5. John East commented on Jan 2

    For the reasons stated above, economists will always lean towards a bull stance, and joe public will obviously follow. The bull attitude is the defaulf setting on Wall Street.

    To be a bear requires specific reasons, i.e. some idea of what is happening in the world, and some ability to interpret what one perceives. Of course, the bears may judge the situation incorrectly, but as a reasoned argument is called for to be a bear it is hardly surprising that there are not many of them out there.

  6. stockman commented on Jan 2

    AAII data suggests we are out of danger for January! NOT imho. AAII data bull:bear ratio HAS fallen from it’s peak mid November of 3.5:1 to 1:1.

    From my trading journal- Sentiment is only important once participants have acted. How do you know they have acted? Market prices and cash levels. Where is the market? Nearer it’s high of the year. Where is cash? Nearer it’s low for the year. Suggesting they have not yet been motivated to ACT. Action is prompted when fear overcomes greed. Usually we get that as prices decline. Note WSJ poll this weekend- 21% of votes that DJIA could close 2006 below 10500… so 79% of investors have no fear of loss.
    We are now at a point where the growing negative sentiment should begin to impact the market. The normal seasonal bull period is drawing to a close. So the bulls turned bears have been hanging in in hopes of catching the Santa Claus gift. Q1 in this consolidation period (over the past 5 years) has not been positive- while some will talk about the ‘best 6 months’ the more recent data should be weighed more heavily. Year end to Q1 lows have ranged from -4% to -15% (2001-2005 DJIA).
    Once we have cash at highs for a traling 12 months and prices are substantially oversold on an absolute basis (9800 is a good number for the 1st trip down) and relative to bonds (stock:bond ratio) AND sentiment has hit it’s low of about .5:1 then the risk reward will have shifted in favor of a more aggressive position- no matter how negative one is on the longer term picture.
    After the lows are in for the year I would agree with the view that a new cyclical bull market with significant upside from the lows- perhaps 50%? by 2008. The key to benefiting from that gain will be identifying when the lows are in AND preserving capital.
    I would not rule out a test of the 2002 lows, around 7000 on the DJIA. The lows are unlikely to be in before Q4. A 50% gain off a low of 7000 should get us back to 10500-11000, right about where we are now.
    With that negative bias considered I will respect paragragh 3 of this comment from a trading perspective.

  7. steve commented on Jan 2

    In the past 5-6 years, every time I have seen one of these polls – and I mean every time – the majority has been wrong.

    Here is vast majority are looking for no change to up 2-11% (11,000 – 12,000). I would not characterize this as very bullish. Actually, the most contrarian view (which I do not have, but this poll gives me pause) is to be an extreme bull, over + 11%.

  8. G Eddy commented on Jan 2

    I suspect that the lopsided bull/bear senitment of the typical reader of the WSJ has more to do with blind hope support for the Republican economic policies (trickle down, borrow and spend) versus that of the Democrat’s (bubble up, tax and spend) than with rationally derived judgments.

  9. Jack K. Miller commented on Jan 2

    I’m pretty much in Steve’s camp on this one; the idea that because many people answered in the up 2 to 11% is nothing to get excited about. The AAII Bears to Bulls 3 week moving average ratio is currently around 50%; no big deal here either.

    Steve is right; the contrarian pick according to this poll is to go high. I’ll take the bet. The build out of the internet, “mobile TV”, and energy projects is going to make for explosive growth.

  10. Jack K. Miller commented on Jan 2

    The weighted average of the survey is about 11,126 or up 3.8%. Hardly what I would call a bullish call. The survey suggest the readers of the WSJ are bearish, calling for below average performance.

    BR: How do you get a weighted average from one man, one vote?

  11. opportunity cost commented on Jan 2

    this may be a lot of focus on the DJIA and not enough on broader or other indexes & averages.

  12. opportunity cost commented on Jan 2

    could this be counterintuitive, where bullish market sentiment is a predictor of a bear?

  13. stockman commented on Jan 2

    How is a call for a 3.8% GAIN a negative outlook? I believe that would be higher than the 5 year average gain of the S&P500, no? The fact that the average expectation is +3.8% and the SP500 just had a what return??? 3% or total return of 4.33%. The average person appears to be extrapolating last year’s results, not unusual.

    I would give that either extreme- DOWN 12% or greater / UP 12% or greater… is more likely than the majority view of up 2-11%. I ‘ll take the under given sentiment as represented by COT data of specs vs. commercials; cash levels as represented at Rydex funds; complacency as presented in the VIX combined with prices being at the high end of the range.

    It is not what people say in a survey that matters. It is how they are postioned in their portfolio. It would appear that they are postioned to MAKE money in a rising market though their expectations are to realize a return slightly higher than cash. Their is little fear of a substantial decline so they are FULLY INVESTED.

  14. John East commented on Jan 2

    I just love the optimism of some of you guys. If I read you correctly, because there is bullish sentiment out there, the contrarian position is that January will be twice as bullish as the bulls expect. Hilarious. Truly hilarious.

  15. Lord commented on Jan 2

    The difficulty with this question is it asks for a prediction on a specific date, testable, yes, reliable, no. One can expect sizable declines or advances and still expect a return to current levels. Since Dec tends toward optimism, I would tend to say these are rather pessimistic results.

  16. LDB commented on Jan 3

    Thanks for taking the time to post. I appreciate opinions.

    Here’s my take: The insiders are building up anxiety regarding the 11,000 mark. It’s 150 points away, it’s 300 points away. It’s 50 points away, it’s 200 points away. . . etc. It will seem as if 11,000 is a huge step, and celebrations will occur as soon as it is reached. (But, really, who cares?) People are deemed to be extravagant for suggesting that the Dow will go up 150 points! I see this as a pessimistic sentiment. (No one is saying that the Dow will be 20,000, etc.) In effect the average opinion seems to be that the market will be range-bound, and mostly flat, and as the intelligent investor knows: a flat market is a bear market. So my summary is that with flat predictions, most people are bearish.

    Then, when the Dow makes it to 11,000, your average investor is supposed to breathe a sigh of relief, and sell with his meager profit, expecting a correction, or staying flat, at best. . . Then the market continues to advance. . . and the average investor becomes more bearish and pessimistic (as the biggest bear is a sold-out bull). My contrary opinion: a greater advance than is expected.

  17. D.Wallener commented on Jan 3

    On what possible basis can this be interpreted as being “very bullish”? Two thirds of the respondents are expecting a tightly range-bound market, that is a definition of “very bullish” with which I am unfamiliar.

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