Stocks Break Records — But Where Are the Bulls?

The stock market’s furious June recovery has successfully propelled the S&P 500 to new all-time closing highs.

But the bulls are nowhere to be found. In fact, many investors are cashing out and prepping for another market meltdown.

Equity allocations experienced the second-biggest drop on record while investors loaded up on cash by the most since 2011, according to a new Bank of America Merrill Lynch money manager survey, via Bloomberg. Trade war jitters and fears of an impending recession contributed to the bearish sentiment, Bank of America notes.

Following a steady barrage of trade war setbacks and growing fears of a global economic slowdown, investors clearly have little confidence in this latest rally to all-time highs.

Even the new AAII weekly sentiment survey shows that market participants aren’t very excited about this month’s rally.

Bullish sentiment rose 2.7% this week to 29.51%, Bespoke Investmet Group notes. But the improvements we’re seeing in bullish sentiment right now have not been at the same pace as the market’s rally off the lows, Bespoke Investment Group notes.

In fact, “bullish sentiment is now around 10 percentage points off where it stood the last time the S&P 500 was at these levels,” Bespoke says.

bullish sentiment

“Versus all other times in the history of the survey that the market was at all-time highs, the current reading for bullish sentiment stands in the 8th percentile, so it is very rare to see bullish sentiment this low given the market’s current state,” Bespoke concludes. “This means individual investors are likely totally caught off guard by recent gains, and there’s plenty of cash on the sidelines that can still be put to work.”

If the market continues to roar heading into the third quarter, I suspect these same investors who have been sitting in their hands will begin buying stocks again.

Still, odds are, lots of investors are looking at this market right now, wondering how stocks could possibly continue to track higher for the rest of the year after the start they’ve had, our stat man Jonas Elmerraji notes.

But if you break down the numbers, stock market booms are rarely followed by busts, Jonas explains.

Jonas pulled some numbers from a National Bureau of Economic Research paper by Yale Professor William Goetzmann that shows booms are much more likely to be followed by more booms.

“A stock market that’s doubled in the past year is almost twice as likely to double again as it is to get cut in half in the year that follows,” Jonas explains. “Just think about that for a second. It completely flies in the face of the common investing wisdom.”

market boom

“More importantly, it flies in the face of market psychology,” Jonas continues. “If you picked ten investors off the street and asked them whether they’d be willing to buy a stock after it had just doubled, most would think you were nuts for even asking the question.”

Big mistake. As the data show, buying stocks that are up big are gives you a much better shot at scoring triple-digit gains.

Speaking of big gains, let’s check on some red-hot IPOs.

Taco Bell, normally the forefront of fast food witchcraft with such masterpieces as the Cheesy Gordita Crunch and Doritos Locos Tacos, is saying no to plant-based protein purveyor Beyond Meat Inc. (NASDAQ:BYND).

“An executive from the firm said they will not be following in the footsteps of rival Del Taco in offering the fake meat products of Beyond Meat to its customers,” Investor’s Business Daily reports. “They will also not be adding the offerings of its privately held rival Impossible Foods either.”

Instead, Taco Bell is opting to promote its existing vegetarian options. Who needs Beyond Meat when you can just order a bear burrito?

But Taco Bell’s decision hasn’t let the air out of the fake meat bubble. Beyond stock slipped just about 2.5% yesterday. Shares remain just a few dollars shy of their all-time closing highs.


Greg Guenthner

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Greg Guenthner

Greg Guenthner, CMT, is the editor of Opening Bell Fortunes and Seven Figure Signals. He has been with Agora Financial/Seven Figure Publishing since 2005. In 2019, the average position in Greg’s Sunrise Fortunes portfolio outperformed the S&P 500 by 1.65x.

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