CMG Equity Market Risk Barometer: Short-term Investment Sentiment has reached Extreme Pessimism – suggesting a bullish equity investment posture.
By Steve Blumenthal, CEO, CMG Capital Management Group
Interestingly, investor sentiment, as measured by NDR’s Daily Trading Sentiment Composite, has been in the extreme pessimism zone about 26% of the time. During which the S&P 500 Index has gained 33% per annum (12-30-1994 to present. Note data in the chart below). During periods of extreme optimism (about 28% of the time) the S&P 500 Index declined nearly 11% per annum. Data that shows the crowd is usually wrong at sentiment extremes.