Where Do You Think the Stock Market is Headed?

Fear of Heights?
Fear of Heights?

Dear Mr. Market,

Here we are...now what? You reached an all-time high this week with the S&P 500 breaking the previous record of 1,565 set in October of 2007. Congratulations! Although you've taken today off for Good Friday, here we sit at 1,569 and everyone is wondering ..."what's next?". Will you break out to even higher levels or is the expected correction that everyone is talking about becoming more and more of a given?

We ask you these questions because it’s times like this when many investors make critical decisions. Passing historic levels in the stock market can be more than just a headline. For some it’s a time of reflection and it allows the investor to see where they’ve come from since the last bear market or how they’ve done since the last time the market was this high. Breaking new highs shouldn’t be the trigger that tells an investor to reassess their strategy though.

Since nobody we know has a crystal ball, what we really want to know is how most investors are feeling in light of reaching these levels. Humans have a natural fear of heights. As a market gathers steam and prices rise most investors welcome that and typically “feel” good. A different feeling then creeps in when new levels are reached. Investors then believe with each new high that a reversion to the mean will occur and the market is bound to correct. Sure, the “writing is on the wall” and just about everyone we speak to thinks (feels) that the market will correct soon. This opinion is held the most by those that either have not participated in the recent market run-up or those that perhaps are trying to sell a different vehicle.

So…back to our supposed fear of heights. Where do most investors think this market is going? Are they more bullish or bearish than they were in December of 2012? According to the American Association of Individual Investors they actually are less bullish but also a touch less bearish. What that leaves us is with more folks simply not knowing anymore (i.e. neutral).

Click the link below to see past weekly results for the AAII Investment Survey:

file:///Users/MyPortfolioGuide/Documents/Investor%20Sentiment%20Survey%2012:12:12%20to%203:28:13.pdf

For your own knowledge the long-term average for Bullish readings is 39%, for Bearish it’s 28.7%, and for those in the Neutral camp it’s 33%.

For now, we’ll just enjoy the day off from trading and worrying about your future direction another day. We just wanted to chime in and let you know how we’re feeling today. Enjoy the Easter holiday and we’ll see how you wake up on Monday.

Where is the Stock Market Headed After Reaching New Highs?

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