The Most Bullish Signal in the World

The S&P 500 is about to open at an all-time high.

Here are some numbers:

• This will be the 777th intra-day all-time high since 1982*
• All-time highs have happened on just over 8% of all days
• The average 1-year return is 10.2%. The average 1-year return following an all-time high is 11.5%. This does not include dividends

So everyone is bullish right? Hardly. According to Barron’s latest Big Money Poll, only 27% of money managers are bullish on the stock market over the next 12 months, which is the lowest reading in 20 years.

I don’t think people are worried because stocks are at all-time highs. This poll was probably conducted a few weeks ago. But it’s funny how all-time highs, which are as bullish a signal as you can ever get, makes people more cautious. At all-time highs you remember the dot-com bubble. At all-time highs you remember the great financial crisis. At all-time highs you remember how quickly these gains can evaporate.

I understand this sentiment, but it’s almost impossible** to be a good investor if the most bullish signal in the world is interpreted as anything other than what it really is.

*I chose 1982 because, I only have intra-day highs going back to 1970, and stocks were underwater during the 1970s, so there weren’t many (any) all-time highs to choose from. 

**Stop it. You’re not Stanley Druckenmiller.