“One comment on sentiment as a contrary indicator. You’ll hear a lot of bulls say that this is a contrary indicator and suggests selling has exhausted itself. But I just don’t think we are anywhere close to that point. With markets still in sight of all time records, and only 3 months from them, most investors are still clinging to the view that the economy is strong and stocks will recover. It will take time to shake them all out and until then the trend will be down.”
– “New Jobs Appear To Be In Short Supply; Sentiment Moving Towards Recession/Bear Market” , Top Gun FP, Friday January 4
As I noted last Friday, the ISM Manufacturing and BLS Jobs Reports and the consequent market action appeared to have led to a notable bearish shift in sentiment. A number of analysts and economists moved into the bear camp and the overall feel changed.
That said, there are still plenty of bulls. If you watch CNBC you’ll see plenty of commentators saying that the “fundamentals are sound”, “valuations are cheap”, etc… and that they are bullish on stocks. I think the breakdown of sentiment is getting closer to 50/50 but the bulls still have a slight edge.
On TheStreet.com Liz Rappaport profiled four prominent bulls on Wall Street “Recession Naysayers Hold Out”:
– MKM’s Michael Darda – who won’t shave his beard “until the recession talk ends or housing recovers”. So much for his dating his life.
– Northern Trusts’s Brian Wesbury
– Wells Capital Management’s James Paulsen
– Lehman Brothers’s Ethan Harris
These guys will surely hold on for quite a bit longer. Let’s keep paying attention to bulls who finally throw in the towel. We are only at the very, very beginning of this process and it will take a year or two more to shake out the ones who are capable of changing their views out.
UPDATE (Tue 1/8, 3:15pm PST): This post was excerpted by the WSJ’s stock market blog MarketBeat.