We’re not yet at the top.
Investors are nervous about everything, and because of this, the current bull market still has room to run, according to Wells Fargo’s Gina Martin Adams.
In a note to clients, Adams writes that at the market peaks in 2000 and 2007, more than 50% of investors were bullish on stocks.
Today, just 25% believe in the market.
“Equity investors seem nervous so far in 2015, “Adams writes.
“Nervous that the economy is not on solid enough ground to withstand tighter policy. Nervous that valuations are too high and earnings growth is too low. Nervous that the bull market is just too long in the tooth, and overdue for a ‘correction.’ And finally, more recently, nervous that the rise in long-term interest rates will have ugly spill-over effects for U.S. stocks.”
Adams notes that this feeling is pretty normal in the run up to when the Fed tightens its policy. Stocks returned just 0.3% on average in the six months leading up to the last three rate hikes, and gained 3.4% in the six months after.
But until more investors believe in stocks, we’re probably not at the top.
“At the market peak in 2000, 66% of individual investors were bullish. Likewise, at the peak in 2007, 55% were bullish. Today, just 25% of individual investors are bullish stocks. Until investorsbecome significantly less nervous about the future for stocks, the longer-term bull market likely remains intact.”
Adams’ 12-month fair value estimate for the S&P 500 is 2,222.
On Friday, the index closed slightly lower at 2,092 and last month, it hit an intra-day high of 2,134.72.
And judging from the way investors are feeling, stocks still have room to run higher.