Americans' stock-market optimism hits record high. But there are risks.

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Tuesday’s consumer confidence reading from the Conference Board showed that sentiment got a boost following President-elect Donald Trump’s electoral victory. Even if the gauge remains below its pre-pandemic average, it has at least risen to a 16-month high.

But the data also included another revelation that caught investors’ attention. The share of Americans who expect the stock market to rise next year has risen to record levels.

The 56.4% reading was the highest level ever in the history of the survey, which dates back to 1987.

Often, sentiment gauges like this are considered reliable counter-indicators, meaning that investors should be selling when optimism appears to be peaking.

Mike O’Rourke at Jones Trading crunched the numbers, and found that stocks have tended to stagnate in the past when optimism has been this stretched.

“Throughout the history of the survey through this past February, there have been 22 readings above the 45% level. The S&P 500 was higher a year later in 13 instances and lower in 9 instances. The average return for the 22 instances was 2.94%. Since March, the readings have all been above 45. With today’s reading they average out to 50. Next year we will find out how those readings have fared,” O’Rourke said in emailed commentary.