Charles Schwab Chief Investment Strategist Liz Ann Sonders says that while a rise in investor sentiment has made the market more vulnerable to bad news in the short term, she remains optimistic on stocks for the longer term.
“My optimism in the medium-to-long-term has not been dented by the latest sentiment readings,” Sonders says in her latest market commentary on Schwab’s site. “Last week was the 26th consecutive week of better-than-expected economic news. Of the 17 indicators that ISI tracks that did a good job tracking 2010 and 2011 double-dip recession concerns, only two are presently weakening, with First Call’s earnings revision index notably strong. However, I do think the market has become more vulnerable to negative news in the short term.”
Sonders says some sentiment indicators are showing that investors have perhaps become too bullish. But she cites a number of factors that make her think that, on the whole, the sentiment picture is okay. Among them: Investors continue to pile into bond funds rather than stock funds; a “Crash Confidence” index survey done by Yale shows that 75% of respondents believe there is “a high likelihood” of a market crash; and surveys show that CEOs are confident in their businesses prospects while consumers remain very pessimistic — both of which are bullish signs.