The Investment Pros Turn Bearish

"When the facts change, I change my mind. What do you do?"

I bet most people believe they are bold enough to follow this quote (commonly attributed to John Maynard Keynes) and change their minds. But it's much harder to follow through on than you might think...

After all, once you've put your name on something – once you've really owned an idea – changing course can make you feel like a fool... or worse, a fraud.

But it's something you must do well to be a great investor. It's how you can ride out a bull market successfully... and then change course, selling before the market bust.

Again, it ain't easy. But you've got to do it to succeed.

Yesterday, Steve shared why he no longer expects a major bust in 2021. Retail investors were clamoring for stocks at the start of the year... But now, that frenzy has died off. So he's changing his mind.

There's more than just that though. Professional investors aren't bullish either, as I'll share today. And that's another strong indication that this bull market can continue.

Let me explain...

This is a crazy situation. But professional investors are getting downright bearish as stocks rocket higher...

We can see it in the September Global Fund Manager Survey from Bank of America Global Research. This survey questions 258 professional money managers, who collectively handle more than $800 billion in assets.

These are the pros. And we'd expect them to be long stocks, given how good the market has been to them. Instead, these folks are much less bullish today than they were a few months ago.

Here are two key points from the survey...

Back in March, nearly all of the investment pros expected profits to improve. But those expectations have fallen every month since... And today, there is no consensus. Only a few more fund managers expect profits to rise than those who expect them to fall.

It's even worse when you look at profit margins. Again, a vast majority of these folks expected margins to be higher than last year. But now, after stocks have soared over the past few months, the majority expect margins to be lower than last year.

To sum it all up, these investment pros are living through one of the least volatile times in history... They're racking up big gains during it... Yet they're scared of what's to come.

That fear isn't just playing out in what they say – it's playing out in their own portfolios, too. Their cash positions have been on the rise in recent months. And the only reason to hold cash today is because you think you'll be able to buy stocks at a lower price in the future.

This is not what you'd expect to see at the peak of a Melt Up.

You'd expect to see investment pros "swinging for the fences," as Steve put it yesterday. And if they were, we'd be worried – it would be a sign that the market was near its top. But these folks aren't wildly bullish today. They're scared... scared enough that they're raising cash.

As contrarians, that's incredibly telling. It means that this boom isn't driven by wild speculation. It was at the start of the year. But as Steve explained, that's over now.

The mania has worn off. And now, stocks are soaring the old-fashioned way – on strong fundamentals.

Again, the facts have changed. So it's time to change your mind. Investors are scared of stocks... And that means prices can go much higher from here. Stay long.

Good investing,

Brett Eversole

Editor's note: Don't forget... Tomorrow, at 1 p.m. Eastern time, our company's new senior analyst Matt McCall is going public with a story he wants to put directly into the hands of investors. He'll cover the true danger to your finances today – an idea that flies in the face of the mainstream media narrative – and the exact steps you should take in response. Click here to save your spot for this online event.

Further Reading

"Big gains tend to squash investor fears and send folks chasing after more profits," Chris Igou writes. But for this group of stocks, that isn't happening. Instead, investors have been fleeing in droves. And that could lead to a major opportunity in the future... Read more here: Investor Fear Will Likely Send This Market Even Higher.

Wall Street professionals are expecting a drop in corporate profits. While that sounds like a bad sign for the Melt Up, it doesn't mean stocks won't outperform in the coming months... Get the full story here: Profit Expectations Crash... Here's What It Means.

Market Notes
THE HOME-IMPROVEMENT TREND IS STILL GOING STRONG

Today, we’re checking back in on a company that’s riding the home-improvement trend…

When coronavirus lockdowns kept people at home last year, folks took on more home-improvement projects to kill time… Now, that trend is continuing even as states reopen. Companies like Lowe’s (LOW) and Floor & Decor (FND) are thriving. And today’s company is benefiting, too…

Home Depot (HD) is a $370 billion home-improvement giant. It offers a variety of do-it-yourself supplies such as power tools, paint, lighting, window treatments, and more. The company achieved record-breaking sales and earnings for 2020… And it’s building on that momentum this year. Home Depot posted record sales of $41 billion in the second quarter, up 8% year over year. This marks the first time the company has surpassed $40 billion in quarterly sales.

As you can see in today’s chart, HD shares have soared since bottoming at the onset of the pandemic. They’re up more than 130% over that period… recently hitting a fresh all-time high. As folks keep taking on home-improvement projects, HD shares should perform well…