SLC Management and its affiliated investment managers will offer their alternative investment strategies to the U.S. high net worth market.
Helping investors meet their current cash flow and future capital appreciation goals.
Unlimited access to our bond offerings and dedicated, personal support
Customized portfolios selected and managed by professional managers
Partnering with select institutional managers
Expert advice, ongoing trade support, and transparent pricing
An emphasis on solid investment disciplines and specific asset classes
March 04, 2024
January 29, 2024
TOP
Financial Industry Insights from Advisors Asset Management
On March 26, 2018
AAM Viewpoints – Spiking Investor Fear May Indicate a Buying Opportunity
Every time someone asks for our equity market projection we always include the obvious: a correction can occur at any time. Corrections are normal, needed and provide structure for markets to move higher over the long term. The current equity market correction is no different. During a correction, the mood of investors moves from greed to fear.
Contrarian market sentiment indicators can help to target cyclical tops and bottoms of markets rather accurately. Identifying these extremes in emotion can help investors who would like to add to their holdings but don’t want to do so at near-term tops. Spikes in greed tend to correlate with cyclical tops and spikes in fear tend to accompany cyclical bottoms.
Source: CNN
At this point we believe the market is very close to a crescendo of investor fear. The chart above is the CNN Fear and Greed Index, which is a great tool to measure changes in investor emotion. As can be seen, the index is currently at 7 which indicates extreme investor fear. Because this indicator is contrarian, a crescendo of fear would tend to be correlated with a near-term market bottom. In short, this is likely a very good entry point for adding to one’s equity holdings, in our opinion.
We do not profess to try to call the top or bottom of any market as we believe that is a fool’s game. We believe that being fully invested on an ongoing basis is the best strategy for long-term investors. Market timing rarely has any long-term value. After having said this, we have clearly sunken firmly into the “buy” zone with the indicator sinking from over 40 back to 7.
Some might argue this is a secular top to this market, however, that would be hard to believe as our outlook for corporate earnings is very bullish. Stock prices tend to follow earnings and earnings are headed up. Could there be headwinds? Sure there could. Trade barriers could slow the rate of growth. The Fed could restrict growth by raising interest rates too quickly. We don’t see those current threats as enough to derail a global expansion.
As corrections go, this one is textbook. It is complete with a huge dose of investor fear and anxiety that has risen to a level that would tell us that the correction is likely almost over and higher prices are ahead.
CRN: 2018-0305-6470 R
This commentary is for informational purposes only. All investments are subject to risk and past performance is no guarantee of future results. Please see the Disclosures webpage for additional risk information at commentary-disclosures. For additional commentary or financial resources, please visit www.aamlive.com.
topics
Be the first to read our latest posts.