Good Morning,


I just have one thing to say:  pray for a correction.


Nutty right?  Well, when you are finished reviewing the latest sentiment stats, I think you will see the general benefit in hoping for same.


First – a mild backdrop:


No doubt the period between August 2008 and March 2009 was horrific.  The pendulum swung against us all and the future looked bleak.  It was our version of the Great Depression.  Terms and acronyms were being tossed around like candy.  The government was stepping in “to help” in ways we had never seen before in current generations.


Here is the deal though:  the drop in prices for the market ended 8 years ago (as of next Thursday) – and get this:  14,000 DOW points ago.


Sadly, for advisors and investors alike – a vast majority of those who could have benefited from that recovery, did not.


Why?  Blinding fear.


Fear so deep that cash earning nothing felt better – to the tune of $9.2 Trillion sitting in the bank – still idle.  Fear so deep, bonds earning 2% were shoveled in the door as stocks were steadily shoveled out.  Fear so deep – that even today – after 12 straight record high closes ending just 48 hours ago – we seem them followed up by a FALL in bullish sentiment and a rise in bearish sentiment.


Check it out:

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Clear as Mud


The top chart is the latest AAII bearish sentiment – released yesterday!  It shows that even as the markets have tacked on 2,000 Dow points – bearishness has risen steadily.


The second chart shows that after 12 record closes in a row, bullish sentiment is at best – mid-range, and no better than levels seen thousands and thousands of DOW points lower.  All one needs to note is that current bullish readings are no better than those seen weeks after the lows in March of 2009 – all the data is above for you to see.


Head Scratcher….


Think that’s odd?  The sell-side chart we update you on occasionally is refreshed as well. Are Wall Street’s smart guys feeling any better?  Nope….scroll down:

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Too Many Ghosts – So Little Time


Don’t leave that chart above too quickly.  Really take note of the fundamental damage done to the psyche of investors by the 2008-2009 nightmarish conditions and media heyday.


Note again that today’s data show sell-side experts are literally more afraid today of stocks than they were in 2009!  Further, they feel no better or more confident about the future of the US than they were in the late 80’s and through the mid-90’s – a mere 17,500 points ago.


One word:  staggering.


By the way – this is before we get a single dollar of bottom-line earnings improvements or additional pro-business growth benefits from the upcoming tax changes, regulatory changes or the investment capital repatriations headed our way.


Most important of all – this is before the real demand impact gets rolling from the largest generation of demand consumers ever seen in the US.


It is easy to forget that half of Gen Y is still under 18.


It is even more calming to note that Gen Z is birthing at the same pace as Gen Y.


Keep that up for another 9 years and the US will be the only country on Earth with two record size, back-to-back generations of demand already in the pipeline.


Sentiment is not the only big tailwind we have (supportive on setbacks and internal chop), manufacturing data continue to show solid upticks.  As the snapshots below will show, not only here in the US but Europe as well – so much for the end of the world on Brexit.


I say bring on a few more Brexits, right?

Yesterday’s ISM manufacturing data came in stronger than expected.  Ditto for today’s non-manufacturing data which also shot past estimates – hitting 57.6 after expectations of 56.5.  Remember, we stated for the last 30 months that companies had effectively gone on a “capital investment strike” given extremely poor actions emanating from DC.  That strike is thawing.  Don’t let your politics confuse your economics.


Supporting this outcome, note the charts above:  We should all find it a positive to see that the data from the Eurozone also shows improvement (first chart above).  Typically, a coordinated pickup in activity both here and overseas really changes the mood of the markets.  While sentiment remains contained (excellent news), one can surmise the data are supporting the higher movement we see in global equity markets.


As the second chart above suggests, our manufacturing data on an overlay of GDP hints strongly at an approaching pickup in overall economic growth in the months to come.


The bad news?  Rates better rise or the new Armageddon will be all about “overheating” and the Fed being behind the curve.  Rates will rise faster as growth improves – so don’t fear it.


By the way, the markets can do just fine with a few ticks higher in rates.


The Big Picture


Think people first – they drive markets.


Stand in the correct spots and let the waves roll in.  Be patient and disciplined.


No matter the theme, chop is normal, setbacks are healthy and risk is always present.


Your time horizon changes your perspective of risk, which is why your plan remains vital in keeping you on track.


The United States is sitting in a wonderful spot.  The fears of the past have all been birthed on the back of a market which has risen to new highs during all of the noted fear-mongering.


As the noise gets louder, the sentiment stalls – even as prices do not.


See through the fog:  This is a good thing for long-term investors.


Our demographics are the most powerful on Earth for a developed nation.  The game has just begun.


Until we see you again, may your journey be grand and your legacy significant.