Stocks Plunge Risk at Highest Since April 1984, Survey Finds Share
Feb. 3 (Bloomberg) -- Expectations that U.S. stocks will tumble 10 percent or more rose to highest level since April 1984 this week, according to Investors Intelligence’s weekly survey of newsletter writers.
The proportion of investment writers who anticipate a so- called correction climbed to 38.9 percent in the week ended yesterday, an increase from 36.7 percent in the period ended Jan. 27. The New Rochelle, New York-based company has tracked the projections of newsletters since 1963.
Mohamed A. El-Erian, whose firm runs the world’s biggest mutual fund, said today that the largest stock market decline in 11 months may worsen amid persistent U.S. joblessness and economic growth that trails analysts’ forecasts.
“Investors may well find that January’s global equity sell-off was just a precursor to a disappointing year for several asset classes,” El-Erian, 51, wrote in a column published by Bloomberg News. He is the chief executive officer of Pacific Investment Management Co., which manages $1 trillion from Newport Beach, California.
The Standard & Poor’s 500 Index fell 3.7 percent in January, more than any month in a year, after China set higher reserves for lenders and U.S. President Barack Obama proposed curbs on risk taking at banks. The retreat pared the S&P 500’s gain since sinking to a 12-year low in March to 59 percent.
Investors Intelligence found that the proportion of bullish newsletter writers fell to 38.9 percent, the lowest since July, from 40 percent. Bearish publications slipped to 22.2 percent from 23.3 percent.
Some technical analysts, who try to predict stock moves based on price and trading patterns, track investor sentiment as a contrarian indicator. They interpret decreased pessimism and increased optimism as bearish.
The trinc are results from Investors Intelligence’s
analysis of investment newsletters for Jan. 27 through
yesterday. The company determines the proportion of writers who
are bullish and bearish on U.S. stocks, as well as the
percentage who anticipate a correction, or 10 percent decline,
in the market.
This Week Prior Week Comments
Bullish 38.9% 40.0% Lowest since July 21
Bearish 22.2% 23.3% Lowest in two weeks
Correction 38.9% 36.7% Highest since April 1984
Note: When bullishness sank to 22.2 percent in October
2008, it was the lowest since November 1988. The bearish reading
of 54.4 percent that month was the highest since December 1994.
The 15.6 percent bearish proportion in December 2009 was the
lowest since April 1987.