A Once-In-a-Decade Buying Opportunity Is Almost Here By Sean Michael Cummings, analyst, True Wealth
"On Wednesday, I bought a variety of stocks..." "I'd been trying to restrain myself. Just about everything has been in a downtrend this year. But things are just too irresistible now." My boss and mentor Steve Sjuggerud wrote those words in DailyWealth 14 years ago. At the time, the great financial crisis was still unwinding... The S&P 500 Index was down 18% from its October 2007 peak. Professional investors were as bearish as they had been in a decade. Things looked pretty bad. But Steve called it "the least risky time to buy stocks in the last decade." Time proved him right. The S&P 500 bottomed just eight months after he made his call. If you bought on his recommendation, you'd be up about 200% today. Where Wall Street saw unending misery... Steve saw a terrific buying opportunity. That's because he knows the power of betting against extreme market sentiment. Today, negativity is everywhere you look in the market... And that means a new chance to buy is on the horizon.
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It's no wonder folks are feeling so down today... War has broken out in Eastern Europe. The supply chain has been in shambles for over two years. The Federal Reserve is hiking rates to rein in soaring inflation. And now, folks are forecasting a recession... All of this doom and gloom has resulted in the worst first-half performance for stocks since 1970. We're seeing negative headlines crop up all over the media. And a handful of notable sentiment surveys have never been more pessimistic than they are today... "Consumers Say 2022 Is the Worst Economy Ever." That's the headline of a July 6 article from the Wall Street Journal. The article cites the Michigan Consumer Sentiment Index ("MCSI")... The MCSI has polled at least 500 Americans every month for about 70 years. It probes folks' feelings about the economy, business conditions, and their personal financial situations. Sure enough, it has never been less optimistic than it is right now. And it's not alone... The New York Times|Momentive Poll affirms consumers' dreary mood. Established in 2017, this poll samples more than 5,000 Americans. It's also the most pessimistic it has ever been. The Conference Board's Consumer Confidence Survey is bearish, too. Its Expectations Index is at its lowest level in nine years. These surveys all read the same way: Main Street is bracing for the worst. The dread has even wormed its way into the minds of finance professionals... Bank of America issues a monthly survey to fund managers to measure their mood about the economy. You can probably guess what the results were this time... But what may surprise you is how extreme the negative sentiment has become. The respondents reported a 14-year low in stock allocation, a 21-year high in cash balances, and all-time negativity about global growth and profits. Unsurprisingly, risk tolerance was also at an all-time low. But here's the kicker... All this fear is actually a bullish signal. It points to the same upside Steve was writing about back in 2008. It's when investors are at their most confident that you should be wary. Consider dot-com companies in the 1990s, real estate in the 2000s, or bitcoin last year. In each case, folks were raking in the cash. That meant there was a long way to fall when sentiment soured. But things couldn't feel more different today. The market mood is miserable – maybe even a little scary. And this is the same setup Steve saw back in 2008. This situation could get worse before it gets better. But today, stocks are more hated than they've been in years. And the lower they go, the better the buying opportunity will be when the trend changes course. Good investing, Sean Michael Cummings Further Reading "The average Joe on the street is scared," Brett Eversole writes. With rising inflation, heightened geopolitical tensions, and global supply-chain issues still prevalent today, the market is chock-full of negativity. And this could provide the perfect chance to earn huge returns once the trend reverses... Read more here. "It's hard to make all the right moves in a crisis," Brett says. That's why many investors are fleeing the market amid ongoing volatility. But history tells us that we could see a massive turnaround from here... Learn more here: Investor Bullishness Just Hit a Decade Low. |
Market Notes HIGHS AND LOWS NEW HIGHS OF NOTE LAST WEEK Booz Allen Hamilton (BAH)... "offense" contractor
Immunocore (IMCR)... biotechnology
Option Care Health (OPCH)... infusion therapies
Acadia Healthcare (ACHC)... behavioral health care
Centene (CNC)... health insurance
Grocery Outlet (GO)... discount grocer
e.l.f. Beauty (ELF)... cosmetics
Texas Pacific Land (TPL)... oil and gas land royalties
American Campus Communities (ACC)... student housing REIT NEW LOWS OF NOTE LAST WEEK Mercury General (MCY)... insurance
Newmont (NEM)... gold miner
Barrick Gold (GOLD)... gold
Agnico Eagle Mines (AEM)... gold
Wheaton Precious Metals (WPM)... precious metals
Healthcare Realty Trust (HR)... outpatient health facilities REIT
Innovative Industrial Properties (IIPR)... cannabis REIT
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