Equity Market Sentiment
August 7, 2009
The market is now up nearly 50 percent from its March 2009 low. The evidence suggests to us that the "Monster Rally" will continue to climb the "Wall of Worry" for the next 12 months and our model Beacon Master Portfolio is currently fully invested. There will of course be bumps along the way and the first one may occur during the late August to first weeks of September (See bottom chart below), just as perhaps the 'green shoots' are turning into recognized flowers.
We will also be keeping a close eye on the Ned Davis Research Crowd Equity Market Sentiment poll for confirmation of this short term "Bump." The current figure is 62 percent, which is at the lower band of extreme pessimism. We expect bullish sentiment to expand further as the "Monster Rally" continues to strengthen in August. The historical peak is around 68 percent, although we did hit a high of 75.7 percent in late 2003 before equities hit extreme short term sentiment turbulence.
We will be looking to raise cash in our model Beacon Master Portfolio on confirmation of the September turbulence, with the expectation of reinvesting the proceeds at lower market levels in mid to late November.
