This Sentiment Indicator Has A Message For You

&l;strong&g;What to make of the intense interest in Bitcoin and&l;/strong&g; &l;strong&g;the S&a;amp;P 500&l;/strong&g;

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I spend a&a;nbsp;lot of time looking for evidence. &a;nbsp;Evidence about market direction, market health, emerging trends in sectors and industries, and companies temporarily &a;ldquo;down on their luck&a;rdquo; with investors. &a;nbsp;As part of that evidence-hunting, I scout a series of common sentiment indicators, and have created a few of my own which my team and I use to make decisions for the portfolios we manage.&a;nbsp;&a;nbsp;&l;strong&g;I just devised a new sentiment indicator, a very personal one, and I think it tells a&l;/strong&g;&a;nbsp;&l;strong&g;lot about where investors&a;rsquo; heads are at&l;/strong&g;, especially those who read (which are, of course, the wisest of investors).

The sentiment indicator I created simply&a;nbsp;&l;strong&g;tracks the readership of the articles I write for over the previous six months&l;/strong&g;, grouped into several different categories. &a;nbsp;In particular, I pay attention to the implication and content of the article&a;rsquo;s title. &a;nbsp;This might sound really sophomoric, but read on and give it a chance. &a;nbsp;I think you will see why I believe it has a message for us.

&l;strong&g;The 5 most popular articles of the 26 I have published during the past 6 months all have something in common: their titles contain the words &a;ldquo;Bitcoin&a;rdquo; or &a;ldquo;S&a;amp;P 500.&a;rdquo;&l;/strong&g;&a;nbsp;&a;nbsp;I wrote 3 articles about each, though in reality I never really wrote about Bitcoin, other than to say that it was being over-hyped and that I am concerned that people may be diverting their attention from their true objectives to try to get their share of the market&a;rsquo;s newest shiny object. &a;nbsp;The S&a;amp;P 500 is a popular subject these days because many investors, especially those who have started to invest significant amounts of money (for them) in the past decade have come to regard the S&a;amp;P 500 as &a;ldquo;the stock market.&a;rdquo; &a;nbsp;It really isn&a;rsquo;t, but I will let you file through my articles to see what I mean.

Bitcoin and S&a;amp;P 500, the two magic phrases in my sentiment indicator, accounted for roughly 3/4 of the ENTIRE number of views for all my articles over the past 6 months. &a;nbsp;You have heard of the 80/20 rule? &a;nbsp;This is essentially my own 80/20 rule, in that nearly 80% of the readership was focused on about 20% of the articles. &a;nbsp;Now, we could dissect it further and see if factors such as the date and time of the week we posted the articles, the&a;nbsp;state of the markets at the time we posted, and other technical factors played a role.&a;nbsp; But it is&a;nbsp;&l;strong&g;a basic conclusion I am drawing here, which can be boiled down to a single word: groupthink.&a;nbsp;&l;/strong&g;&a;nbsp;That&a;rsquo;s the urge to take part in something because it is popular, and because it feels more comfortable to do so, since &a;ldquo;everyone is doing it.&a;rdquo;&a;nbsp; How else do you explain why parents are asking their kids about Bitcoin with deep curiosity?&a;nbsp; While I applaud the fact that the generations now have something to talk about other than family infighting and politics, concerning anecdotal stories abound.&a;nbsp; The same goes for the S&a;amp;P 500 infatuation, which has blinded investors to the idea that past performance is a reliable indicator of future performance, when the opposite is most often true.

So, Bitcoin was the most popular drawing card for your collective eyeballs the past 6 months, and S&a;amp;P 500 was the runner-up.&a;nbsp; What other observations can we make about this sentiment indicator, which I will unofficially dub the Forbes-Isbitts pageview indicator, or FIV Indicator for short.&a;nbsp; I know, not very memorable, but I digress.

Here&a;rsquo;s a group of vital topics for investors to understand in&a;nbsp;today&a;rsquo;s market environment:

&l;ul&g;&l;li&g;The end of the nearly 4 decades old bull market in bonds&l;/li&g;

&l;li&g;The 1987 stock market crash, and some eerie similarities to&a;nbsp;today&a;rsquo;s market activity and issues&l;/li&g;

&l;li&g;Dividend stocks behaving very differently than they have done traditionally&l;/li&g;

&l;li&g;Technical chart patterns of major market indexes that may provide insight into the reward and risk tradeoff for investors in the current environment&l;/li&g;

&l;/ul&g;&l;strong&g;These 4 topics, all of which are essential for you to understand if any of the major threats to the currently buoyant investment climate, have met with a collective yawn from readers the past 6 months.&l;/strong&g;&a;nbsp;&a;nbsp;Together, the 5 articles on these topics garnered about 1/10 the readership of the 3 articles that in some way touched on Bitcoin.&a;nbsp; And they were less than 1/5 the readership of the S&a;amp;P 500 articles I mentioned above.&a;nbsp; Wow.

&l;!–nextpage–&g; But should we really be surprised?&a;nbsp; This is what makes a market after all.&a;nbsp; Ask a few of your friends what they think of the stock market and the horror stories will start flying.&a;nbsp; Is it because the markets are rigged, take advantage of the &a;ldquo;little guy&a;rdquo; etc.?&a;nbsp; I think that it has more to do with the penchant for investors to chase whatever the &a;ldquo;in&a;rdquo; concept is, be it indexing, cryptocurrencies, dot-com stocks, house-flipping or whatever.

&l;strong&g;So be alert, look at yourself and your portfolio in the mirror and ask yourself if you are really looking out for you, or simply doing what others are doing.&l;/strong&g;&a;nbsp;&a;nbsp;That sense of safety-in-numbers can give way to a misery-loves-company feeling later down the line.

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