US stocks may start rising soon, an ‘overlooked’ indicator suggests

US stocks will rise soon, historical experience suggests. Those who do not know their history are condemned to relive it, says a well-known saying. The question is whether it can also be applied to predict the development of the stock market. However, the post-war development of the main index on Wall Street suggests that historical experience can be relied upon.

Wall Street is close to a change in investor sentiment. Bearish sentiment could soon be replaced by bullish sentiment. This follows from a twenty-year-old indicator authored by Robert Shiller, a professor at Yale University.

An index indicating investor sentiment

According to the indicator called “US Buy-on-Dips Confidence Index“. According to its development, one can infer how the mood of investors changes on the stock market. And this in response to the weakening of shares by at least three percent in a single day. The lower the value of the index, the higher the probability that the stock market is facing a strong rally.

And just in recent weeks, the value of “US “Buy-on-Dips Confidence Index” got similarly low as in 2018 or spring 2020 after the first wave of the coronavirus pandemic broke out in Europe and the United States and individual countries began to adopt blanket shutdowns. This follows from the analysis of the portal.

Stocks won’t go up until inflation goes down

Relatively strong historical experience speaks against the development that can be expected from the index. Namely, stocks generally did not turn to growth until inflation began to decline from its abnormally high levels. Because by then the Federal Reserve had not started lowering its interest rates.


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