Warnings about overly bullish stock sentiment have been better left unheeded this year. Have times changed?
The latest victim of the rampaging bull market in stocks is the Wall Street maxim that glowing investor sentiment is a sell signal.
Throughout 2021, a range of surveys, fund-flow figures and options activity have shown investors big and small to be exceptionally bullish. Yet major U.S. indexes continue to rally to records, putting the Dow Jones Industrial Average up a healthy 13% for 2021. Analysts have long relied on sentiment and related data on risk-taking as contrarian indicators. By the time friends, colleagues and strangers are plowing money into stocks and telling you about it, it’s time to run for cover, to this way of thinking. Likewise, when everyone is selling, you should be buying with both hands.
But for much of this year, it has paid enormous dividends to stay with the herd. It’s the latest departure from the tried and true in a year that already has brought
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