The Dumb Money Is Nearing Maximum Confidence

  • Jason Goepfert

    Jason Goepfert

    Published: 2019-07-18 at 10:12:30 CDT

Confidence nears upper bound

Over the last couple of days, Dumb Money Confidence has poked above 80%. While it has gone higher over the past 20 years, this is in the top 2.3% of all readings.'

It’s high enough that it has preceded weak returns, especially in recent years, and those times when stocks aren’t coming out of a major decline.

Barometer is busting

A fundamental indicator created by Yardeni Research, the Boom-Bust Barometer, has been “busting” even while stocks reach new highs. The Barometer hit a 52-week low this month even as the S&P 500 hit an all-time high.

This has indicated some troubling conditions in the past but was too inconsistent to be considered a warning. Curiously, it led to atrocious returns in gold and bonds.

More signs of optimism

The Investor’s Intelligence survey of newsletter writers now has a Bull Ratio in the top 5% of all readings in the past 30 years. Such high readings led to poor 1-year returns, with the S&P averaging only 2.3%. Excluding the super-momentum years of 2013 and 2017, that dropped to -1.3%, with risk of -10.9%.

On the mat

The Dow Jones Oil & Gas Index is now negative over the past 6 months while oil futures are up more than 8%. That has happened on 413 days since 1991, leading to a positive return in the sector 78% of the time a year later, averaging +12.2%. When the opposite occurred, that dropped to a 56% win rate, averaging +5.2%.

This post was an abridged version of our previous day's Daily Report. For full access, sign up for a 30-day free trial now.

The post titled The Dumb Money Is Nearing Maximum Confidence was originally published as on on 2019-07-18.

At, our service is not focused on market timing per se, but rather risk management. That may be a distinction without a difference, but it's how we approach the markets. We study signs that suggest it is time to raise or lower market exposure as a function of risk relative to probable reward. It is all about risk-adjusted expectations given existing evidence. Learn more about our service , research, models and indicators.

Follow us on Twitter for up to the minute analysis of market action.

Not ready to signup up for a free trial yet?

Signup for our Daily Lite email to receive highlights of our daily report, research and studies.

RSS Feed

Subscribe to the Blog RSS feed

Recent Blog Posts

As mentioned in...

Brought to you by:

Sundial Capital Research Logo