Sir John Templeton once said: “Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria.”
If he was right, investor sentiment seems to support the idea the bull market may be around for a while. The American Association of Individual Investors’ most recent poll indicated investors aren’t feeling very optimistic:
- 20 percent of investors were bullish – fewer than in the previous poll, and far lower than the historic average of about 39 percent.
- 47 percent of investors were neutral – fewer than in the previous poll, and far higher than the historic average of about 31 percent.
- 33 percent of investors were bearish – more than in the previous poll, and slightly higher than the historic average of about 30 percent.
Investors have had plenty to worry about. U.S. economic growth appears to be slowing which has created questions about the wisdom of a possible Fed rate hike. “Liftoff,” as some have called the much anticipated interest rate change, could also affect the global economy. The World Bank and International Monetary Fund have cautioned against a 2015 increase suggesting, “…a premature rate hike in the United States would exacerbate volatility in the world’s currency markets and hurt the global economic recovery.
The Fed isn’t investors’ only worry. Last week, the International Monetary Fund walked out of Greek debt negotiations. The BBC reported:
“Greece is seeking a cash-for-reform deal, to avoid defaulting on a €1.5bn debt repayment to the IMF… The EU and IMF are unhappy with the extent of economic reforms the Athens government is offering in exchange for the release of a final €7.2bn (£5.3bn) in bailout funds. Their bailout deal with Greece runs out at the end of June.”
If negotiations fail, Greece may be forced to leave the Euro which the BBC said could make the country a pariah in international markets. U.S. stocks finished the week higher despite losing value when Greek debt negotiations stalled.