Hulbert Rewinds 20 Years

Mark Hulbert tracks newsletters and has done so for many years. He keeps records, and sees similarities in newsletter sentiment between the 2000 top and now…

Why the Dow’s top 20 years ago is a warning for stock investors now

I often use the MSM and its blaring headlines as a very helpful contrary indicator, but not so with Hulbert. He reports on sentiment and is not an indiscriminate noise maker.

In fact, after reading through my newsletter archives from January 2000, I was struck by the similarities between now and then. For example, one newsletter editor in mid-January 2000 said he was encouraged that the Fed was signaling that it wouldn’t be raising rates as aggressively as previously thought. Another said “inflation is dead.” A third celebrated the strength of the economy as evidenced by robust consumer spending in the Christmas season that had just ended.

Sound familiar? To be sure, these similarities don’t mean the U.S. market is at or near a top. But they do illustrate the false comfort we gain when telling ourselves that a bear market can’t happen since the economy is strong, inflation is moribund, and the Fed is accommodative.

Check out the rest of the article. It’s a good frame of reference. Hulbert also notes the ways in which the market is in better shape today than 20 years ago, including valuation…

This interests me because I believe that the market is not particularly over valued by traditional metrics. When I call it a bubble I mean that more because the steroidal monetary and now fiscal policies pumping it up are at absolutely sublime levels. It is the massive and coordinated policy that is the bubble. Meanwhile, legions of conventional analysts and market watchers track P/E levels, dividend yields and all the stuff they learned to gauge in business school.

The ecosystem that the stock market exists in today is not standard. It is Wonderland. It… is the bubble.

alice in wonderland

But I digress. In this Wonderland conventional analysts and money managers are smart. Momos and speed freaks are smart. The “stocks for the long-term” crowd is smart. Newsletters, which piled in to an extreme in January of 2018, are over bullish and smart, although the blue highlight shows that curiously by this measure, they were far less bullish at the 2000 top. From Yardeni.com

investors intelligence

My theory is and has been that THE sentiment extreme already happened, in January of 2018. It happened by the I.I. above and several other sentiment indicators we track in NFTRH. It need not – and very likely will not – happen again before the next significant market top.

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