There are plenty of ways to make money investing...
You could use one of the core philosophies like deep value investing or pure trend following... You could pick an options strategy... Or you can focus on individual stocks or larger macro trends.
Any of those techniques can work. But some strategies are easier than others. And any investment professional will probably tell you that one of the most difficult strategies to pull off is shorting stocks.
That's true for a simple reason: Stocks have a powerful upward bias.
The S&P 500 Index has gone up in roughly 75% of the calendar years since 1950. So while tough markets like today's do come around, they're the exception, not the rule. And most of the time, you should assume stocks will head higher.
Still, investors are scared. And they've forgotten about what history has shown...
One recent survey shows that folks are more bearish than they've been at any other time in the past decade (since the survey began). Only a third of investors expect stocks to go higher from here. But that negativity means stocks are shaping up to be a smart bet in 2023.
Let me explain...
Stocks might have a powerful upward bias. But that's not much comfort in the middle of a bear market.
Everyone knows the saying "buy low, sell high." That means it's a good idea to buy during times like these, when stocks are down. But in reality, most folks tend to freeze up.
Instead of taking advantage of lower prices, most people expect the worst. And we can see that bearishness right now through the Federal Reserve Bank of New York's Survey of Consumer Expectations ("SCE").
This monthly online survey began in 2013. It asks a rotating panel of roughly 1,300 households what they expect for their own economic situations. And one key question asks whether they expect stocks to be higher or lower a year from now.
Not surprisingly, the October reading was near the lowest on record. Take a look...
Just 33.9% of respondents in October expected stocks to head higher. That's only slightly more than the 33.8% low we saw in June. And while the November figure jumped to 35.7%, it's clear that most investors are darn bearish.
This data only goes back to 2013. But these recent levels still tell us a lot about how investors feel right now...
The long-term average reading was more than 40%. And the high from April 2020 was nearly 52%. So it's clear that investors expect much less from stocks today. They're extremely bearish – even though the market has already experienced plenty of pain.
That doesn't necessarily mean the bottom is in. But market bottoms don't happen when investors are excited. They happen when folks are scared. And that's the case right now.
We don't have the all-clear to buy just yet. There isn't a clear uptrend in stocks. So it's not time to back up the truck just yet.
Instead, you want to be ready to act. No one sees opportunity out there... But in reality, we're getting close to an incredible chance to buy.
"Investors have been exiting stocks since the middle of June," C. Scott Garliss writes. Folks have been pulling their cash out of the markets and onto the sidelines at a rapid pace. But history suggests these outflows could be setting up a new boom... Read more here.
A new bull run is coming. Still, we always want to wait for the uptrend before stepping up to buy. Recently, Marc Chaikin – founder of Chaikin Analytics – shared a simple way to track the trend in the overall market... Get the full story here.