A 'Changing of the Guard' in Investment Sentiment

What's the best long-term investment?

It might seem like a simple question. But human behavior complicates things...

If you looked only at past data, a clear answer would emerge. But that answer assumes investors have all the details they need to know – and, most of all, that these folks are acting rationally.

Unfortunately, investors aren't so rational. They tend to follow their emotions and make the wrong bets at the wrong times. And that's true today.

We're seeing a major change right now in what Americans think is the best investment. And we'll want to keep a close eye on this new trend.

Let me explain...

Gallup is one of the best-known companies for polling around the world. You probably know the name from its political polls. But the company also has many surveys on social and economic issues.

That includes its Economy and Personal Finance poll. This survey features the same simple question that we mentioned above.

The respondents choose their top long-term pick from five different types of investments... stocks and mutual funds, bonds, savings accounts and certificates of deposit ("CDs"), gold, and real estate.

Gallup has been asking Americans this simple question each year since 2011. And the most recent data came out last month. Take a look...

The results show a major shift from prior years. In fact, the trends are in place for a massive "changing of the guard" in investment sentiment.

Real estate remains the reigning champion for Americans. A hefty 34% of respondents believe it's the best long-term investment. But that figure is down from last year's peak of 45%. And we haven't seen a lower reading since 2015.

This big reversal means that folks are more worried about real estate than they have been in years. But that's exciting news for contrarian investors.

We see a similar situation in stocks. Only 18% of respondents chose stocks as the best long-term investment. It's the lowest reading since 2011. And it's also down from 26% in 2021.

That's no surprise, given the market's brutal year in 2022. Fewer investors believe in stocks despite the market's terrific long-term track record. And that's more good news for us contrarians.

The last asset worth highlighting is gold. The metal jumped from 15% last year to 26% in 2023. In doing so, it replaced stocks as the No. 2 best long-term investment.

Most sentiment measures show folks aren't that excited about gold these days... even with the metal near all-time highs. But the recent poll shows investors are beginning to pay more attention.

We're still well below the 34% reading we saw during the gold mania in 2011, though. So the rally can still get a lot crazier from here.

Overall, investment sentiment is shifting. Investors are worrying about the poor performers... and getting excited about the ones doing well. They're looking at the recent past instead of what's coming next.

That's the opposite of how we want to act as contrarians. And in the case of stocks and housing, it means the worst could be behind us.

Good investing,

Brett Eversole

Further Reading

"The housing crash that everyone expects probably isn't coming," Brett says. With soaring mortgage rates and crashing affordability, most folks believe a housing bust is inevitable. In reality, one force has kept the crash at bay – and this won't change anytime soon... Get the full story here.

Futures traders are betting against the stock market in droves. We've seen a persistent rally this year – and yet, bearish sentiment is still getting worse. Here's why this could signal a contrarian opportunity... Read more here.