You can add the Royal Bank of Scotland Group plc (NYSE:RBS) (LON:RBS) to the growing list of equity bulls, as head of cross asset strategy John Briggs has said that he thinks people who are still avoiding stocks are caught in an outdated crisis mentality.
U.S. financial crisis and the European debt crisis
“Even though equities and risk assets have had a very impressive performance this year, headlined by the S&P which is +20% YTD, I have gotten the sense that very few investors are particularly long risk assets,” writes Briggs. “To a large degree, I think we are still living in a crisis mentality.”
It’s not just the U.S. financial crisis and the European debt crisis that he thinks has people spooked, but the way so many different types of risk are being presented as potential catastrophes: “The Fiscal cliff. The Sequester. Berlusconi. Cyprus. Higher rates which would bury stocks. The Chinese slowdown. The German elections. Berlusconi again. The poor October seasonals for risk. The Government shutdown. Debt ceiling and default.”
None of these risks have been as bad as people expected
So far, none of these risks have been as bad as people expected, and we’ll know one way or another about the debt ceiling in a few days, but the stock market continues to perform, up about 20 percent so far this year.
Briggs quotes Nate Silber, the statistician best known for his coverage of the 2012 presidential election, saying that a simple Gallup Poll is the best way to measure what the stock market is going to do, except that it does the opposite of what most people think it will. The last time Gallup polled people about the stock market was in April, and the public was pretty bearish right before the explosive growth started this summer.
The people Briggs works with on a daily basis aren’t exactly the public, but the more people ask him whether it’s time to get in, or if equities are already overbought, the more he figures people want to go long on equities but are held back after years of caution.
“The contrarian in me will be paying particularly close attention to when I stop getting asked about the level to ‘get back in’ on my trading floor and from clients. The rate of frequency of those questions is still going up, not down.”