I didn’t expect to see another opportunity like this so soon…
We saw the worst correction of the current bull market in late 2018. Stocks fell nearly 20% before bottoming in December.
The fall spooked investors… They panicked out of the market. But that was the wrong move to make.
That’s why I pounded the table on stocks in January. And it’s why I personally put a lot of money to work back then.
It was the right call to make. Stocks are now up 25% from their December bottom.
Still, despite the recent rally, investor panic is setting up another buying opportunity. And double-digit upside is possible as a result, starting now.
Let me explain…
Investor panic is hard to quantify. You can’t easily apply numbers to feelings – but that doesn’t mean we can’t try.
One way to quantify investor sentiment is the AAII Investor Sentiment Survey. It’s a weekly survey that asks investors: “I feel like the direction of the stock market over the next six months will be ____ .”
The answers tell us whether investors are mostly bullish, bearish, or neutral. And taking the pulse of investors this way is important…
When the bullish reading is high, it’s usually a bad sign for stocks. But a low bullish reading means investors are scared, and a rally is possible.
Today, investor bullishness is near multiyear lows. Check it out…
Investors went from moderately bullish to incredibly bearish in just a few days. And as you can see, bullishness has rarely been as low as it is today.
This kind of setup is a contrarian investor’s dream. We want to find what everyone hates – what everyone’s scared of – and put our money to work. Right now, that means owning U.S. stocks.
We’ve seen seven instances of pessimism like this since the bull market began. Each case led to big upside over the next year. Check it out…
Not only did each case lead to positive gains over the next year, but double-digit gains were the norm… with an average one-year return of 19%.
No one believes that kind of gain is possible today. Everyone is scared. But a 19% gain is absolutely possible from here, thanks to the intense investor pessimism we’re seeing right now.
I know it feels scary out there. And I know we have had a few bad days in the market. But history says we shouldn’t hit the panic button yet.
You want to own U.S. stocks now… More gains are on the way.
Good investing,
Steve
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Source: Daily Wealth