April 27, 2023
By Peter Bower
CNBC, the financial news network, recently polled 1,000 investors and found that 69% were pessimistic for the future, 53% expected the economy to get worse, and only 24% considered this a good time to invest. These numbers are astounding. Rarely are such negative numbers seen. There is an adage on Wall Street that says when everyone is positive, be negative, and when everyone is negative, be positive.
People are social beings, influenced by the crowd. Once extremes of sentiment are reached, most investors have already acted on the obvious. Optimism begets more, and most investors that are inclined to buy, usually already have. Conversely, extreme pessimism usually indicates that most have already acted on negative impulses and have raised as much cash as they are comfortable with.
When news comes that is the opposite of what most expect, there is usually a big market adjustment as so many investors must readjust their positions. This is why taking a contrarian position so often works well. Timing is always tricky, but extremes are a good indicator. We are at an extreme, so be positive and at least stay steady.
The Lonely Bull
