In March 2009, “investor bullishness” hit the lowest levels of the last decade.
Since then, stocks have soared more than 200%. But here’s the shocking thing…
[ad#Google Adsense 336×280-IA]Despite years of steady gains, “investor bullishness” recently hit an extreme low… one of the lowest we’ve seen since the bull market began.
Based on history, that’s a good sign for stocks over the next few months.
Let me explain…
Gains keep racking up in stocks… but investors simply aren’t interested.
This might be the most hated bull market in history. Stocks have spent the last six years climbing the “Wall of Worry.”
Everyone is looking for the next “black swan” to derail the economy and cause a crash in stocks. Despite years of gains, no one is excited. No one is piling in…
We got a clear reading of this negativity in the most recent American Association of Individual Investors (“AAII”) survey… It showed us exactly how low “investor bullishness” is right now.
You see, the AAII survey asks individual investors if they’re 1) bullish, 2) bearish, or 3) neutral about the stock market over the next six months.
Two weeks ago, only 25% of investors told AAII they were bullish on stocks. That same number bottomed at 19% in March 2009, before stocks took off. And since the bull market began, we’ve only seen a reading of 25% or lower a handful of times.
Not surprisingly, stocks tend to do well when investors aren’t bullish, like today. The table below shows how stocks have performed over the past six years whenever “investor bullishness” hit the extreme levels that we’ve seen recently…
The S&P 500 has had median six-month returns of 9.7% over the last six years. But buying after an AAII reading at or below today’s level led to six-month gains of 10.8%. That’s a 1.1% outperformance.
Similarly, a year later, stocks did 3.5% better buying after this extreme. They returned median gains of 17.7% versus just 14.2% for all S&P 500 one-year periods.
These aren’t massive outperformance figures. But stocks do tend to perform better when investors aren’t interested.
Shockingly, investors aren’t interested six-plus years into this bull market. And based on history, it means we can expect more gains from here.
Good investing,
Brett Eversole
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Source: Daily Wealth