If you want to know how investors feel about the markets, don't ask them. People tend to say one thing and do another.
Instead, you need to look at what they're doing with their money. Fund flows don't lie. And that makes them one of the best ways to keep track of investor sentiment...
Today, investors are terrified of U.S. stocks. This year, we've seen the largest flows out of stock funds since 2008, relative to the flows into cash and bonds.
That's right... Even with U.S. stocks hitting all-time highs, investors are still scared. And as contrarian investors, we know this is hugely positive. It should mean even more upside from here.
Let me explain...
Bull markets don't peak when folks are scared. They peak when folks are euphoric... when there's no one left to buy.
Just look at what happened during the run-ups to the 2000 and 2007 market peaks. Investors threw caution to the wind. They were buying with no fear of a major downturn.
Then, when there were no buyers left, the top finally came.
That's the type of euphoria you would expect today, after a decade-long bull market. But despite this record run-up in stocks, investors are still scared...
According to investment bank Goldman Sachs, American stock funds have seen $100 billion in outflows in 2019. Meanwhile, more than $350 billion of inflows have poured into bonds... while more than $430 billion flowed into cash.
Investors are getting out of stocks and into safe-haven assets. Fears about the trade war and a possible recession are keeping investors on the sidelines.
But if you've stayed on the sidelines in 2019, you've missed out on some big gains. The S&P 500 Index is up more than 20% so far this year. Check it out...
U.S. stocks continue to climb higher. They've even been hitting new all-time highs.
Folks should see this as positive. They should be clamoring to buy. The enthusiasm should be palpable... But it's not.
Instead, investors are getting out of stocks. But I don't expect this to last forever.
Soon, fear of missing out will call investors back to stocks. They'll get greedy. And as investors start to pile back into the market, we could see much higher stock prices...
In fact, that's exactly what's likely to fuel the final stage of the Melt Up that my colleague Steve Sjuggerud is calling for. And it's why you need to still be invested today.
Don't let the "wall of worry" scare you away from buying U.S. stocks. Today's fear is another bullish sign for the overall market... Stay long.
Good investing,
Chris Igou
P.S. Investors haven't been this scared since the 2008 financial crisis. But now is the time to be greedy... because today's setup could lead to the biggest moneymaking opportunity of the past 20 years. Recently, Steve sat down with legendary stock-picker Matt McCall to talk about how to profit from the Melt Up – and to share the name and ticker of what could be the best-performing stock of 2020. Watch their presentation right here.
Further Reading
"You've heard the warnings," Vic Lederman says. "That this is one of the longest bull markets... and it's losing steam... and there are recession indicators flashing." The markets have been making new highs... But the naysayers are louder than ever. Get the full story right here.
"This is the longest stock market bull run in history," C. Scott Garliss writes. "And while this can't go on forever, central banks are going to do their part to eke out those final gains for investors." A worldwide shift is happening... And Scott says it's good news for anyone who is invested right now. Learn more here.
Stocks are likely to continue higher as investors pile back into the market. And this consumer-staples company is one of the best you can buy...
AMERICANS HAVE CASH TO BURN ON FAUCETS AND LIGHTING
Today, we're highlighting a soaring "fixer upper" stock...
Longtime readers know we track several sectors and businesses to get a read on the U.S. economy. When people are splurging on travel or recreation, it's usually a sign that the U.S. consumer remains strong. The same can be said for home remodeling...
Masco (MAS) is a $13 billion home-improvement supplier. It makes and sells faucets, home spas, lighting, paints, cabinets, and more. When people spend to upgrade their homes, Masco provides many of the necessary products... And right now, this key "fixer upper" supplier is making steady sales. Although it missed earnings estimates in the most recent quarter, Masco's revenues have increased every year for the past five years.
As you can see in today's chart, shares have soared since bottoming in December. The stock is up about 60% this year alone, and it recently hit a new 52-week high. As long as people still have cash to remodel their homes, this stock should continue higher...
