By Tom Bradley
It was reported this week that millionaires are feeling more bearish. The Spectrem Millionaire Investor Confidence Index fell to -18, which represents “mildly bearish territory”. Prior to the August score, the index had been in neutral range (-10 to +10) for 12 straight months. In response to the number, Spectrem president George Walper said the “decline is particularly troubling since it suggests millionaires, typically more sophisticated than the broader affluent population, are reverting to a bearish frame of mind.”
As readers of this blog know, I learned from Art Phillips to watch market sentiment very carefully. When everyone is bullish, it’s generally a time to be careful. And when everyone is running for the hills, it’s time to pull out the buy tickets. Sentiment is not an exact timing tool, but rather a check against what the fundamentals and valuations are indicating.
I’m not familiar with the Millionaire Index, but it confirms what I’m hearing from clients and people I’ve been meeting with in Toronto over the last few weeks. The sentiment among investors is generally cautious, and at times downright gloomy. One senior portfolio manager went so far as to say that he thought the investor mood is worse now than it was after the market declines of 2008.
I’m not reading too much into the Millionaire Index or individual comments from the street, but I certainly differ from Mr. Walper in my interpretation. When investors – rich, poor, professional or amateur – are wary of the market, it’s a good thing for future returns. The more bearish the better.