Editor's Note

10/11/2007 12:00 am EST

Focus: MARKETS

Howard Gold

Founder & President, GoldenEgg Investing

October 10, 2007

It's now unanimous: we're in a bull market, and stocks are headed higher for the rest of the year.

That's the verdict from our first MoneyShow.com Financial Advisors' Sentiment Indicator, whose results were released today.

Our poll of nearly 300 independent financial advisors, which concluded this past weekend, showed strikingly similar results to earlier MoneyShow.com sentiment surveys of individual investors and traders, as the table below indicates.

  Financial Advisors Investors Traders Investors
  October September June July
Sentiment        
Very Bullish
12%
14%
23%
14%
Bullish
59%
49%
47%
50%
Neutral
14%
20%
14%
18%
Bearish
10%
13%
3%
13%
Very Bearish
5%
4%
13%
5%
         
Total Bulls
71%
63%
70%
64%
Total Bears
15%
17%
16%
18%
Favorite Assets        
Foreign Stocks
36%
30%
N/A
39%
Large US Stocks
24%
29%
N/A
25%
Commodities
20%
17%
N/A
22%
Small US Stocks
11%
13%
N/A
10%
Bonds
3%
3%
N/A
1%
Real Estate
3%
N/A
N/A
1%
Cash
3%
8%
N/A
2%

The results suggest a strong consensus across the spectrum of the independent active investing community in America. (Among other surveys, Consensus, Inc. covers brokerage firms and Investors Intelligence features independent newsletter writers.)

And it's clear that Main Street is bullish on Wall Street.

The extent of their bullishness is consistent, too, ranging from 63% to 71%, while total bearishness has remained under 20%. And the results vary little over three different market seasons-from the late spring-early summer rally, to the late summer correction, to the move to new all-time highs following the Federal Reserve's 1/2-percentage-point rate cuts as autumn loomed.

So, it appears that independent financial advisors, as well as serious individual investors and traders, can shut out the market noise and media chatter and focus on the big picture-that stocks usually go up, we're likely not headed for recession, inflation is pretty subdued, and the Fed may continue to cut rates for the rest of the year.

Some 59% of the advisors polled think the Standard & Poor's 500 index will rise, but less than 10%, between now and December 31st, making them somewhat bullish. Another 12% are looking for the S&P to rally more than 10%, putting them in the very bullish camp.

On the other side of the fence, 10% expect the market to drop less than 10% (somewhat bearish), while only 5% are looking for a much bigger, 10%+ drop (very bearish). Some 14% are neutral.

The financial advisors also agree with investors on their favorite asset classes. Foreign stocks were numero uno-36% expect them to be the best performers until the end of the year. Some 24% look for large US stocks to top the charts, and 20% expect commodities to take the lead.

Foreign stocks, large US stocks, and commodities ranked one, two, three in our previous investor surveys as well.

And voila!, the performance of those assets this year has mirrored the poll's preferences: the MSCI EAFE All-World ex-US index has risen roughly 20%, the blue-chip Dow Jones Industrial Average is up nearly 14%, and the Reuters/Jeffries-CRB Index of commodities has gained about 6% so far in 2007. Not a bad call.

As for the economy, most of the financial advisors polled expect inflation to remain constant, US economic growth to slow and the Federal Reserve to lower short-term interest rates.

MoneyShow.com will poll traders again in November, before the Traders Expo.

Many savvy investors regard sentiment indicators as good contrary indicators to the market's likely direction-especially when they reach bullish or bearish extremes. The theory is that when too many people expect the market to go the same way, it's likely to do the opposite.
 
That may eventually be the fate of MoneyShow.com's sentiment indicator as well. But for now, so far so good.

Comments? Please email us at TopProsTopPicks@InterShow.com.

Howard R. Gold is editor-in-chief of MoneyShow.com. The opinions expressed in his commentary are his alone and do not necessarily reflect the views of InterShow.

Video Coverage on the MoneyShow.com Financial Advisors' Sentiment Indicator Results

Sentiment Results Are In

Video Coverage on Past MoneyShow.com Sentiment Indicator Results

MoneyShow.com's Sentiment Indicator Results

Savvy Investors Still Bullish

Related Articles on MARKETS