Boy is this market ever hated. How do we know that? Because there is a well established sentiment indicator we all trust, the American Association of Individual Investors poll, and it shows that we have the most bearish sentiment in five and a half years. Almost 50% of those polled believe stocks are going to go down. The last time we had such a reading it was a terrific buying opportunity but you didn't know that then any more than you might know now.
I would love to tell you that you should buy the market because it is so hated. It would be so sensational to be able to say just go all in, embrace the decline, because the sentiment can't stay this negative for too long.
But I can't.
I can't because back then there were no alternatives to owning stocks. They had the best yields and money was so cheap you were forced into stocks.
Not anymore. These days you can get a certificate of deposit out a couple of years that yields more than 3%. Sure, that's not so great versus what a stock can give you over time or what the S&P 500 has given you. A diversified portfolio's a great way to make money.
Sadly, though, for many people, particularly baby boomers, the market's become too treacherous and if you think it's not a risky time I believe you are someone who is comfortable bungee jumping off the George Washington Bridge.
These days I can't say how foolish you are to go into these CDs. Instead I feeling like telling you how foolish you are putting all of your money into stocks.
Now I know Jay Powell doesn't' want to consider stocks as part of an overall wealth effect. But when he raises rates next week - and I think it is when not if - savers will, once again, be treated to an even more lucrative CD. And investors will pull out another wave of capital from stocks as they have for weeks on end now.
I am urging you to think a little more long-term. There are plenty of companies doing well and plenty of stocks that have fallen out of bed especially like today.
That said, I totally recognize that this is one of those times where you enter the house of pain the moment you purchase a stock. Three instances: Adobe (ADBE) , Costco (COST) and Johnson & Johnson (JNJ) . If you had bought any of those stocks yesterday you would say, wow, that was one of the worst financial decisions I ever made. Adobe and Costco must have had shortfalls and this JNJ story about their knowing about asbestos in talc, something that may cause cancer in users, is dreadful, as bad as the asbestos companies that got wiped out when it was found out that they knew that asbestos was bad but said nothing.
I look at it the other way. Adobe had a terrific quarter but the stock was up well in advance of it. Same with Costco. The fact that the stocks had run AND that they started heading down made investors believe things must have been bad. There was no rigor to the process. JNJ? I think it should come through it fine. Not at first. The JNJ side will come out, though, and I think it will make the situation much less clear and therefor much better for JNJ.
No matter. I am just trying to make three points: First, the sentiment can't stay this negative for too long because it never does and has been a good buying opportunity, 2, that doesn't make it a good buying opportunity right now and 3. for some stocks, though, ones with more pronounced declines, it's not a bad time to do some buying.