Bear Markets by David Kauders

Author:David Kauders [Kauders, David]
Language: eng
Format: epub
Tags: finance, investment, economics, business, money, markets
Publisher: INscribe Digital
Published: 2016-02-04T00:00:00+00:00

Sentiment and opinion

The background mood of investors, pundits and market participants is a fairly good contrarian indicator. During the bull market there is a broad change in sentiment from the don’t-want-to-know attitude of the general public, after the previous bear market panic phase, all the way through to “everyone should invest as much as possible” which marks the peak of the bull market in the excess phase. Enthusiasm is usually greatest at a market peak.

Bear markets start from the proverbial clear blue sky, delivering a surprise fall in prices for no apparent reason and just when concern spreads to the general public, the market about turns and starts to rise. This is the bear market rally, the counter-trend correction in which prices rise even though the overall trend is down. The news climate (the tone of commentary about economies and markets) improves and positivity returns as the counter-trend rally proceeds. Near the peak of each counter-trend rally, news stories tell us the economy is recovering, prospects are just fine and, of course, buying shares is recommended.

When share prices again break downwards, pessimism progresses from the City pages, via the personal investor pages, to front-page news stories. This may be the cue for opinion-editorials to appear saying there is nothing to be concerned about.

Nonetheless, opinion does slowly start to shift away from pro-equity propaganda, as pundits start to consider alternative strategies. Falling prices bring a change of mood as the public’s enthusiasm for investment wanes.

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