High Number Of Consumers See Stock Rally As "Sure Thing"

Tyler Durden's picture

Via Dana Lyons' Tumblr,

The percentage of respondents in UM’s survey of consumers who view a stock rally over the next 12 months as a “sure thing” is near record levels.

Most folks are familiar with the University of Michigan’s monthly consumer confidence survey. What they may not know is that the survey respondents are asked a whole host of questions. One of these questions pertains to their outlook on the stock market. Specifically, they are asked to guess as to the “Probability of Increase in Stock Market in Next Year”. Respondents’ answers are broken down into ranges of probability percentages, e.g., “1%-24%”, “25%-49%”, etc. One of the answer options is “100%” probability of a stock market increase over the next year. We like to track this statistic as a measure of public sentiment towards stocks. And based on the most recent survey, as of February, the public is relatively quite certain about the prospects of a stock market rally.

We say this because the percentage of survey respondents in the “100% probability of a stock market rally” category came in at 11%. For context, since the inception of the survey question in June 2002, there has been just one month which saw a tally exceeding 11% and just 3 others equaling that high of a number.

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Here are the prior such months and the tally of respondents indicating 100% probability of a stock market rally.

  • February 2004 (12%)
  • November 2007 (11%)
  • January 2015 (11%)
  • June 2015 (11%)

With most sentiment-related statistics, extreme readings are contrary in nature. That is, the market typically moves contrary to the consensus opinion. That dynamic generally holds true here. Here are the 12-month returns in the S&P 500 following the above readings:

  • February 2004 (+5.12%)
  • November 2007 (-39.49%)
  • January 2015 (-2.74%)
  • June 2015 (+1.73%)

While 2 of the 4 precedents saw positive 12-month returns, they still paled in comparison to the median (+10.35%) and average (+8.02%) 12-month returns over the sample period. Plus the 2004 incident saw negative returns out to 8 months, and the June 2015 incident out to 9 months. So, in all 4 cases, the longer-term performance of the stock market was sub-par, at best.

Here is the takeaway for us. Gathering bullishness is great for stocks and the prospects for a rally. Once that bullishness hits an extreme, however. the prospects change. Based on the UM Survey Of Consumers, sentiment towards stocks has reached an extreme. And based on that alone, expectations for the next 12 months should be tempered.

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The_Juggernaut's picture

This is going to be a good year to 'sell in May and go away'.

knukles's picture

It's very important that we all remain optimistic and share the happiness so stocks can keep going up.

DingleBarryObummer's picture

My grandma would have called that thinking "voodoo"

JRobby's picture

This ends in tears and worse.

Retail investors will be annihilated for the third time in sixteen years. That makes it tough to "retire".

"They" count on you dying soon.

"Thanks for playing"

migra's picture

Everyone has been preaching doom and gloom for years here, yet it never comes. One day it will but how much money will you leave on the table before then???

indygo55's picture

Well,,, gloom and doom pretty much came in 2008. They did a stick save and delayed it for another round. But thats the plan. Slowly they work. Very slowly they shave your wealth and put it in their pockets. Most people don't even know they are being fucked. And it works. 

Arrow4Truth's picture

This message brought to you by a "sure thing" consumer. There is a hint that you may still be saved from the carnage that approaches due to the assertion, "one day it will." I leave no money on the table... cause I choose not to play. The house always wins. Good luck with your wagers.

DingleBarryObummer's picture

Hey, Marko, what would happen if you (the unstoppable force) ran full steam into the blob (the immovable object)?

SheepDog-One's picture

Well so what? A big pile of bull shit is also a 'sure thing'.

DingleBarryObummer's picture

My wife being unsatisfied in bed is a "sure thing," but you don't see me giving up!

10mm's picture

Get another Pussy or  Cock in there. She will be satisfied. Mine, loves it. It's not personel, it's business. 

buckstopshere's picture

The herd is ready to be slaughtered.

Pray for them.

Silver Savior's picture

They sure had enough time to prepare but I guess they don't care about their own well being. I usually feel sorry for people but in this case absolutely not. Makes me sick.

Silver Savior's picture

Precious metals are the only sure thing. Get priorities straight.

Soul Glow's picture

As a contrarian I'll keep stacking.

Consuelo's picture

 

 

Get out of that artist's loft - you're looking way to gaunt of late...

ebworthen's picture

November 2007 down almost -40%, short memories.  Let's go for -60% next time 'round.

S&P 666 was true valuation.

Consuelo's picture

 

 

I wonder if 666 really was true valuation - if...   The market had been left to clear naturally.

scoutshonor's picture

666 would be ~ 72 % down, about right--I like it.

BSHJ's picture

and that is why you need to diversify your portfolio.....so you can be sure and have eveything down at least 72%

Barney08's picture

With the fed blowing endless cash on worthless VIX Calls the rally is a sure thing. " Get rich or die trying"

indygo55's picture

"“We’ll know our disinformation program is complete when everything the American public believes is false.”

William Casey, CIA Director 1981-1987


francis scott falseflag's picture

 

When the rank and file CIA agents found out that Casey had

ordered an operative at Chernobyl not to close a crucial valve,

they gave him a brain tumor followed by a fatal lobotomy. 

Fed-up with being Sick and Tired's picture

Your Lyons share link is not working!

rockstone's picture

They have 'em right where they want 'em.

ElTerco's picture

Sorry, this is not a high number. It sounds like 89% of respondents were rational decision makers.

francis scott falseflag's picture

 

 

High Number Of Consumers See Stock Rally As "Sure Thing"

 

Don't you mean 'high" consumers see stock rally as "sure thing".

 

"I'm calling my broker as soon as I finish this quart of ice cream and these Domino's buffalo

 

wings.  I love da munchies."

Arrow4Truth's picture

Guess that means that I'm not a consumer since I see the rally as a false flag rather than a sure thing. I quit being a consumer 10 years ago. My production cancels out my consumption which results in a zero sum. Think I'll change my user name to Incognito.

francis scott falseflag's picture

 

This rally is not a false flag, it's SUI GENERIS

And whatever it is, it started in March 2009.


Silver Savior's picture

Yep I went negative too. Just disgusted.