Welcome to the new my.morningstar.com! Learn more about the changes and how our new features help your investing success.

Does Consumer Sentiment Predict Stock Prices?

Sentiment doesn't forecast stock prices. It coincides with them. It is driven by them.

Weeks ago, William Blair published a brief note, striking a contrarian theme, warned that if things seem too good to be true, they probably are. It has now been nearly a decade since anything resembling a global bear market, a situation that has comforted investors into believing that securities carry only "minor risks." Compliant government policies, such as ultralow interest rates, enhance the mirage.

Six months ago, I penned my own forewarning, "Is the Contrarian Bell Clanging for Stocks?" As with Singer, my contrarian sensibilities were offended by investor sentiment--specifically, the so-called "Trump Bump." Prior to the election, stocks gained when Hillary Clinton's fortunes rose; investors, it appeared, favored the status quo. After the election, stocks advanced again, because (we were told) investors favored change. Heads stocks win, tails stocks win. That felt like euphoria to me.

So much for my intuition--stocks have since soared, with scarcely a look backward. Well, nobody takes my stock market musings too much to heart. Probably not Singer's opinions, either, even though he is paid to make asset-allocation decisions. Even the gullible realize that predicting the stock market's direction for the next few months is a task that exceeds the grasp of mortals.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Member.

Register For Free

About Author

John Rekenthaler, CFA  John Rekenthaler has been researching the fund industry since 1988. He is now a columnist for Morningstar.com and a member of Morningstar's investment research department. John is quick to point out that while Morningstar typically agrees with the views of the Rekenthaler Report, his views are his own.

Audience Confirmation


By clicking "accept" I acknowledge that this website uses cookies and other technologies to tailor my experience and understand how I and other visitors use our site. See "Cookie Consent" for more detail.

  • Other Morningstar Websites
© Copyright 2021 Morningstar, Inc. All Rights Reserved.      Terms of Useund      Privacy Policy.
© Copyright 2021 Morningstar Asia Ltd. All rights reserved.

Terms of Use        Privacy Policy        Cookies