But what’s really changed since the start of this year to make shares worth less than before?
Nothing, according to analysts at Barclays — apart from a general feeling among investors that stocks aren’t where it’s at anymore.
“We think the 10.2% decline in global equities since 21st May has more to do with a shift in sentiment towards the asset class rather than a substantial change in fundamentals,” said Ian Scott and his team at Barclays in a note today.
They have been counting up all the different bulls (analysts who think stocks will go up) and bears (analysts who think stocks will go down) and found the level of optimism is the lowest since the end of 2012.
Here’s the chart:
But before you rush out and sell your portfolio of shares, the analysts say that this indicator often means stocks are going higher (emphasis ours):
Our favourite measure now signals a degree of bearishness that, at least since the Financial Crisis, has consistently seen the market higher on a 6-month view.
Outside the US, and especially in Continental Europe, we believe equities offer both value and economic and profit cycles at very different stages from the extended US cycle.
If anything, this shows just how effective central banks have been in propping up shares with cheap money policies since 2009. No matter how many people over the past few years thought stocks would fall, they have always done the opposite.
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