In One Chart: Retail investors haven’t been THIS bullish since (gulp) you know when
The bears will tell you this market is a lot like the one back in 2000, when the dot-com bubble was on the verge of its epic collapse.
And, at least by one measure, they’d be spot on.
“For years, individual investors in the U.S. have been a dreary bunch, as stocks soared relentlessly since bottoming out in 2009,” writes Wolf Richter of the Wolf Street blog. “But 18 months ago, in February 2016, they finally caught the bug, and now optimism has surged at a record pace.”
He’s referring to the quarterly Wells Fargo/Gallup survey of investors with at least $ 10,000 in the markets, which noted that 68% of these people said they’re optimistic about the stock market’s performance next year. That kind of outright bullishness hasn’t been seen since 2000.
Taking it a step further, 25% of those investors said they’re “very optimistic” about the prospects — an all-time record — and up from 11% just a year ago.
This “new surge of optimism” has pushed the index of investor optimism up to 138. As you can see from the chart, that’s the highest level since September 2000, and well above the levels of the pre-financial crisis housing- and stock-market boom.
Since February 2016, the overall index has soared 98 points, “the largest increase in the 20-year history of the index that is not a rebound immediately after a major drop in optimism.” This is the kind of move contrarians eat up.
“In 1999 and early 2000, high enthusiasm for stocks was a powerful sign the stock-market bubble was on its last legs,” Richter said. “Of course, no one can say how much higher their enthusiasm will surge this time around. Hype works, until it doesn’t.”