Crash Confidence Looks Bullish

The Yale School of Management conducts a few surveys that measure investor confidence on a monthly basis.  One of them is their Crash Confidence survey that asks both institutional and individual investors how confident they are that there won't be a market crash in the next six months.  Below we highlight the historical survey results on top of a chart of the S&P 500. 

In November, the individual Crash Confidence reading reached its lowest level ever at 22.73%.  As the green line in the chart shows, the prior low in Crash Confidence was in October 2002, which was the ultimate market low during the '00-'02 bear market.  The institutional Crash Confidence reading isn't as low as it got in October 2002, but it's very close.  This negativity is actually a positive for the market going forward.

 

Comments

[Bob Brill]

Please explain: "This negativity is actually a positive for the market going forward."

[Tony]

Bob,It's a contrarian indicator. If the sentiment is negative, then that means all the sellers have sold, thus the market is due to go up from here. That's the rationale.