Is it time to be optimistic?

By Kevin Theissen

The University of Michigan’s index of Consumer Sentiment (UMCSENT) showed an increase in optimism in early December — and it had nothing to do with the Michigan Wolverines winning the Big 10 Championship for the first time in 17 years.

The UMCSENT was up (+4.5%) month-to-month, although it remained down year-to-year (-12.8%). Respondents were feeling a bit more positive about current economic conditions (+1.4%) and significantly more cheerful about the future (+6.8%) than they were in November.

When respondents were asked whether inflation or unemployment was a more serious problem in the United States, 76% chose inflation, 21% said unemployment, and the remainder couldn’t decide or thought both were problems.

AAII Investor Sentiment Survey showed that bullishness crept higher recently, but a larger percentage of investors are feeling bearish (30.5%) than bullish (29.7%). Almost 40% of those surveyed were neutral, meaning they were uncertain whether the stock market would move higher or lower over the next six months.

Some say this survey is a strong contrarian indicator, meaning the stock market may do the opposite of what survey respondents think will happen. In other words, if respondents were strongly bullish, the market might be expected to move lower over the next six months, and vice versa. The strong neutral reading indicates investors don’t know what to expect.

TIM Group Market Sentiment Survey reflects the real-time advice that investment bankers, corporate financial advisors, and other sell-side firms are providing to clients. The week ending Dec. 12, 2021, survey respondents took a turn to the bearish. The survey’s sentiment reading was 43%, down from 46.8% two weeks ago. (A reading of zero is completely bearish and a reading of 100 is completely bullish.)

What do you expect during the next six months?

Kevin Theissen is the owner of HWC Financial in Ludlow.