Investors Intelligence reports that writers of securities newsletters are not optimistic about the U.S. stock market. The number of optimists has fallen to 27.4%, the lowest level it has been in 14 years. Meanwhile, the number of writers forecasting a bear market has increased dramatically to 47.3% over the past five weeks. Similarly, the percentage of writers who are predicting a correction (an additional drop in benchmark indexes of 10% or more) has increased to 25.3%.
This negative sentiment about the markets should not come as any surprise. The Dow has fallen over 20% into a bear market. Banks and brokerage firms have lost over $400 billion due to the decline in the American housing market. The mortgage and credit crisis still has months, if not years, to run. Rising fuel prices threaten to inhibit future economic growth. Many commodity prices have approached record highs.
Investors should carefully evaluate these reports and proceed cautiously. There remains much uncertainty about the length and depth of recent financial problems.