The Market Makes Pros Look Like Schmoes

Published on: 08/23/2022

In this edition of Chart Talk, Tony Ogorek and Jeff Viksjo explain how difficult it is to time the market by discussing contrarian investing.

 

Contrarian investing is an investment style where investors deliberately go against market trends by selling when others are buying and buying when most investors are selling.

 

TRANSCRIPT 

TONY:

Welcome to another edition of Chart Talk.  I’m Tony Ogorek.  I am here with Portfolio Manager, Jeff Viksjo.  And Jeff, the stock market has been known to be “The Great Humiliator”. In other words, you’ve got a trade, you’ve got a buy on one side, sell on another.  And just as soon as everybody gets sucked into one side of the trade, the market tends to move in the opposite direction.  And that’s known as contrarian investing. Let’s take a look at our first chart, and it really sets up for a discussion on contrarian investing.

 

JEFF:

Yeah, and it shows how difficult it is to time the market, even for these supposed pros.  What this chart shows you is they just asked fund managers, who are managing money, are you bull-ish on stocks or are you bear-ish on stocks?  This chart shows that fund managers, professionals, have the lowest, currently, the lowest allocation to stocks that they’ve had since the Great Financial Crisis.  So, they’re incredibly bear-ish.  They’re very negative on the outlook for stocks.  And then Tony, we know, we’ve just had the absolute best month for stocks that we’ve had, really, since November 2020.


TONY:

Yeah, let’s take a look at our second chart here.  And voila, you see in July, the market’s up about 9%.  You look at all of those orange bars going down and a lot of people must have thought, ‘Well geez, if it’s going down it’s just going to continue going down. The Fed’s gonna continue to raise rates.  And my God, the future looks bad.  Russia’s still doing what’s-what.  And we’re hearing about inflation.  Geez, can it get any worse?’  And what does the market do, Jeff?

 

JEFF:

Yeah, so if you bought into the consensus, which is the negative outlook for the economy, like you said, the War in Russia and Ukraine.  You wouldn’t have been in the market.  You would have missed this biggest move that we’ve had in years.

 

TONY:

Right.  And you know Jeff, one of things we offer clients is rebalancing.  So, after we have a year like 2021, you know when the market’s moved up a lot, your stock allocation may have gotten greater.  We tend to pull it back.  And again, just when, you know, you want something to happen, ‘I like it to continue going and giving over-exposure to stocks’, that’s the time to pull it back.  And when it looks really ugly and you don’t want to buy, that’s the time to be staying in.  That’s exactly what we’ve seen.  And history, as they say, repeats once again.

 

So, thank you Jeff.  And thank you for joining us for this edition of Chart Talk.

 

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