Sign of a Top? Americans' Optimism for Stock Gains Was at Record

Stocks Rebound From Rout With Best Day Since 2016

Be wary of the herd mentality, the old stock-market adage goes. Now it may be coming true, judging by Americans’ sentiment just days before equities went into a tailspin.

When asked about the probability of continued stock price gains, respondents in January put the probability of increases during the year ahead at 67 percent, the highest level recorded since the University of Michigan started asking the question in 2002 as part of its monthly consumer survey. Last month’s poll concluded Jan. 29.

As the Michigan report was released on Friday, a global selloff was starting in the stock market, as a strong U.S. jobs report fed investors’ fears about the return of inflation and higher interest rates that could erode corporate profitability. The tumult continued with a plunge on Monday, followed by the Dow Jones Industrial Average and S&P 500 Index swinging between gains and losses on Tuesday.

With consumers increasingly optimistic, including in their belief that the stock market run-up wasn’t finished, economy watchers were also getting confident about a positive spillover into growth in household consumption. Where it all shakes out -- on sentiment, stocks and spending -- is up in the air for the moment.

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