RtS, we follow newsletter writer sentiment, which is still too bullish. What about sentiment of individual investors? It's very bearish. From Barron's...
Charles Schwab last week gave some proof that the average investor is largely quiescent. Despite showing 2% growth in the number of brokerage accounts at the firm last year, figures on daily average trading volume slumped nearly 10%. This comes in an overall market where trading volume has continued to rise, thanks to overactive professional traders.
Estimates of mutual-fund activity indicate that cash has been withdrawn from stock funds, on a net basis, so far in 2003. McManus of Banc of America Securities notes that if the stock-fund flows end up being negative for the month, it will mark the first time since 1990 that there were net redemptions in this sector during the month of January. Normally, the turn of the year brings new retirement and bonus money into equity funds.
The latest survey by the American Association of Individual Investors, which represents investment clubs, showed bearish sentiment rose to 43.18% from 29.17% during the previous week. That's a remarkably high bearish reading, one that can be interpreted as a positive short-term contrary signal (though, of course, the survey occurred before Friday's market rout).
McManus is among those observers who believe the public's risk aversion and revulsion toward stocks indicate that the odds favor equities over safe-haven assets such as Treasury bonds. He thinks buyers of Treasuries today will be lucky to get positive total returns over the next three years.
There's something to the idea that the stock market is safer because so many fear it. But in the absence of better economic and profit performance, who's to say how indifferent or fearful investors can get before a lasting market rise emerges?[snip]
online.wsj.com |
