The best news for investors that I’ve heard for a long time is that MBA talent who manages the world’s pension funds now hates the stock market in retaliation.
According to the latest comprehensive survey by BofA Securities, global investment managers are now in recession and depression at a historic, generational level. Bank of America surveyed about 300 money managers around the world who are managing about $ 900 billion in assets. Depending on how you measure it, they are now as bearish about the stock as they were two years ago during the Covid crash, the depth of the global financial crisis in late 2008, 9/11 in 2001 and a few weeks after the Iraq war in 2003, 9/11 and 1998. The global financial crisis at the end of the year.
What does this mean for you and me, leisure savers?
All that needs to be said about the forecast is the late, great New York Yankees manager Casey Stengel (“never make predictions, especially about the future”) or banker JPMorgan Sr., who when asked about his stock market said the forecast answered that he hopes The share price will fluctuate.
But if the past is similar to the future, then the latest survey results are bullish. This is especially true as the more you stay ahead of the stock market, the less you follow it every day, and the more you are a regular Main Street investor who puts some money into their 401 (k) or IRA at the end of each month.
Out of curiosity I went back and saw eight incidents from the last 25 years when, according to a BofA Securities survey, money managers around the world were as frustrated and pessimistic about stocks as they are now. (Prior to 2008, the survey was conducted by Merrill Lynch, then by Bank of America.)
And I saw how you would be if you invested $ 10,000 in S&P 600 SML each month.
Index of stocks of small US companies and then hold them for five years, which is the minimum recommended investment horizon for an average investor. (I skipped March 2020, because it’s too recent.)
Over the next five years your average return will be more than 100%. In other words, You will double your money.
A small cap index does nothing more than buy a fund when fund managers are really, really pessimistic, and then hang on for five years.
The worst five-year return was 60%, following the 2008 financial crisis. The best was 160%, after the 2008 financial crisis. In one case you never lose money. In six of the eight cases you have done it twice or better.
Why did I choose small company stocks? OK, you can use any broad stock market indicator and the results will be at least comparable. But small-company stocks tend to be more volatile than large-company stocks, so they fall into panic and rise further in a boom. As a result, they tend to be the best way to bet a reverse. In a crisis when buying small-caps, when everyone else is very scared.
Russell 2000 RUT,
U.S. small-stock stocks are a more widely followed index, but the S&P 600 is generally more attractive. This weed out many low-quality, speculative and loss-making small companies. And there is evidence that in small-company stocks, at least, you want to stick to high-quality companies.
As usual, I’m just going with the information that can be useful to long-term investors. What you do with it is up to you.
Those who wish to take these bets have a much lower cost indicator fund to choose from, including iShares Core S&P Small Cap ETF IJR,
For S&P 600 and Vanguard Russell 2000 ETF VTWO,
If you use the S&P 500 Index SPX,
Large company stocks, however, return five-year returns still generally perform very positively, but not quite well. And in one of the eight events জুলাই July 2000 এস the purchase of an S&P 500 index fund, such as the SPDR S&P 500 ETF SPY,
And losing money despite hanging on for five years (even if only 5%). Because at that time a huge bubble of big-company stocks was just beginning to calm down. (Some people argue that we are in a similar situation today with the U.S. big-caps.)
The latest BofA survey also shows that money managers have invested less, especially in bonds, eurozone stocks, emerging market stocks, technology stocks and consumer discretionary stocks. If it is not ultimately bullish for the relevant ETF — for example, say, AGG,
– I would be very surprised.