What would Peter Lynch say about investor sentiment today? Peter described the cycle of a bull market through his experience at cocktail parties. Near the bottom of the market, people at these parties had no interest in talking stocks. They were more interested in hearing what’s going on with the dentist. Halfway through a bull market, everyone at the party wanted to find out what stocks Mr. Lynch was buying. At the end of a bull market, the guest liked to tell Peter Lynch (one of the greatest stock pickers of all time) what stocks they were buying and why.
To gauge where we are in the Peter Lynch bull market continuum, let's take a look at this week's sentiment poll from the American Association of Individual Investors at their website, AAII.com. This is a group of individual investors who pay an annual membership fee and participate in a wide variety of online and in-person events to improve their stock picking and asset allocation prowess. In other words, these are folks that are naturally inclined to the stock market. Here is their latest poll:
As a 35-year student of the U.S. stock market, I am astounded at these figures. These are comparable sentiment numbers to the bottom of the bear market in 2002-03! This was after tech stocks got crushed in the three preceding years and the index had decline more than 40% from peak to trough. When we access the stock market within the context of these numbers and Peter Lynch's continuum, we find it funny that hardly anyone ever asks us what stocks we bought lately.
Putting all of this together, we like where we are.
Lastly, we love what we heard Peter Lynch say in late 2008 on CNBC with the stock market as miserable as it ever gets. They asked him where he thought the stock market was going to go next. He said, "I'm the wrong guy to ask, I'm always bullish."