Ripening Sentiment Toward U.S. Stocks Fails to Ring Sell AlarmsBy
Conference Board confidence measure highest since January 2004
S&P 500 has historically rallied following similar peaks
One measure of U.S. equity sentiment just had its biggest jump since 2009. Does that imply a euphoric moment that puts the bull market on death watch? History suggests not.
A Conference Board index tracking Americans who expect shares to rise surged 45 percent in December, data showed Tuesday. While that was the highest reading in more than a decade, similarly elevated levels haven’t been reliable sell signals. Six times the survey was higher since 1997, the S&P 500 Index rose in the next 12 months by an average of 2 percent, Bloomberg data show.
Surging confidence is a double-edged sword. Exuberant investors are buyers, with the potential to exhaust themselves. December’s bullishness followed the election of Donald Trump and coincided the biggest rally ever to greet a new president. It also came with valuations near decade highs amid the second-longest bull market on record.
Here are some statistics that might suggest stocks have further to run:
- Wall Street forecasts a median S&P 500 gain of 3.5% to 2,340 by the end of 2017, according to a survey of 15 strategists
- Companies in S&P 500 expected to increase earnings by 12% in 2017, which would be the biggest full-year profit expansion since 2010: Bloomberg data
- Premium being paid to protect against 10% loss in SPDR S&P 500 ETF in next 6 months close to lowest since July 2014 relative bets on 10% gain: Bloomberg data