This year’s market performance is similar to last year in uncanny ways, as Michael Santoli notes in this week’s Barrons:
“Aside from that, the market’s field position and the attendant investor-sentiment picture look quite as they did a year ago, a moment that preceded a pretty swift 6.5% reversal in the Standard & Poor’s 500 index, a drop aided in its final stages by the shock of the Japan tsunami in March. The market then bounced to a marginal new high in late April before the European mess and U.S. recession watch spoiled the summer.
At the equivalent point last year, the S&P 500, now at 1342.64, closed at 1343, and because 2010 and 2011 ended with the index at identical levels, the year-to-date rise has been almost equivalent, as has the trajectory of the healthy gain since the prior early October. Until Friday, the market had gone longer without a 1% down day than any period since the one that ended in mid-January 2011.
And check out the relevant gauges of investor attitudes. As can be seen in the Market Laboratory section, the Consensus Inc. bulls are at 72%; they were 71% a year ago. Market Vane is at 66% versus 67%. The American Association of Individual Investors poll, after a spike in optimism last week, sits at 51.6% bulls and 20.2% bears, compared to 49.4% and 26.9% a year ago. Typically, markets don’t accommodate the inclinations of such a lopsided majority in the very near term, anyway.”
Deja vu all over again? Or will a case of the recency effect fool investors and ultimately make 2012 look nothing like 2011?
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.