View Full Version : It's doom and gloom all over again

21st August 2010, 08:55 AM
NEW YORK (MarketWatch) -- Investors are scared--really, really scared.

That's what our latest MoneyShow.com Investors' Sentiment indicator tells us, in big, bold, red letters:


Our most recent survey of the active, mainly self-directed investors who use MoneyShow.com showed the highest bearish ratings we've ever seen--far greater than back in February 2009, just before the market bottomed. Read MoneyShow's "Investors Aren't Believers."

And now, with stocks still 64% off their lows, our usually composed and confident audience, who have kept their eyes on the long-term prize through the worst the markets threw at them, appears finally to have succumbed -- or is it capitulated? -- to the baser instincts of the reptilian brain.

I would call it "fight or flight," but after a scary European debt crisis, the flash crash, and a steady drip, drip, drip of dreary economic news, there's not much fight left in them.

Only 7% of the 657 people who responded to our survey (conducted between Aug. 13 and Aug. 17) expect the Standard & Poor's 500 index /quotes/comstock/21z!i1:in\x (SPX 1,072, -3.94, -0.37%) to rise by more than 10% by the end of 2010, while another 26% thinks it will rise, but by less than 10%.

So, only 33% of those surveyed could be called "bulls"--a huge drop from the 47% who held those views in May or the 57% who were optimistic in May 2009. Read MoneyShow's "Steady as She Goes."

Meanwhile, though the ranks of the very bearish (those who look for stocks to fall by more than 10% by Dec. 31) have remained even at 18%, the percentage of those polled who believe the market will fall but by less than 10% has leaped to 24%.

So, not only is that 42% bearishness the highest since we started polling investors three years ago, it also marks the first time the bears have outgunned the bulls -- and by a comfortable 42% to 33% -- in the history of our survey.

This survey also records the highest levels of neutrality -- 25% -- we've ever seen. So, one out of every four investors polled thinks the market is going nowhere. (The survey has a 95% confidence level, with a margin of error of four percentage points either way.)

That's why it's no surprise we've seen a big increase -- to 11%, from 4% -- in the percentage of investors who think bonds will be the best performing asset class for the rest of the year. Of course, bonds have been among the best performers so far in 2010 -- and investors are clinging to them for dear life.

Overseas stocks, especially emerging markets, also have gotten increased support -- from 16% in May to 24% now. But "made in the USA" has become like the scarlet letter: Only 22% of our respondents expect U.S. stocks to be the best performers for the rest of 2010, the lowest support for domestic we've seen for a couple of years.

Gold and commodities bugs are hanging in there, though. Some 37% of those polled think gold and commodities will be the best-performing asset class for the rest of the year, virtually unchanged since the last time.

Gold has held up well as a haven in a time of turmoil. But it also thrives in inflationary times, and this group can't completely let go of inflation fears, either. Watch the slide show with the results of the entire sentiment survey on MoneyShow.com.