It’s said that people see what they want to see … and that investors see what they want to see.
That was particularly obvious a few weeks ago when value investing legend Jeremy Grantham published his outlook for the S&P 500 (^GSPC).
Grantham’s analysis was about 10 pages, but he summed up his opinion as follows:
“I believe [the bubble] will not end for at least a year or two and probably not before it reaches a level in excess of 2,250 on the S&P 500. I am not saying that this time is different. I am sure it will end badly.”
An objective reader would see two components to Grantham’s outlook:
- The S&P 500 (SPY) will rally to 2,250
- Thereafter the bubble will burst
Here is what the media wanted to see:
“Jeremy Grantham on Bubbles: ‘I am sure it will end badly’” – Wall Street Journal
“Jeremy Grantham: Stocks set to crash around November 2016” – Moneynews
“When Jeremy Grantham sees bubbles, it’s worth paying attention” – The Globe and Mail
“Jeremy Grantham makes a very specific call about when the bubble will burst” – Business Insider
The media has a choice what to report, but let's face it, the media publishes what people want to read. No eyeballs, no advertising revenue. In early May, investors apparently wanted to read crash and burn articles more than hip hip hooray S&P 2,250 here we come type of articles.
Such a lopsided preference for one-sided reporting is a good contrarian indicator.
Mainly because of ueber-bearish media coverage, the May 7 Profit Radar Report proposed that: “The weight of evidence suggests the onset of a larger correction in May, but we are not the only ones expecting a correction. A false pop to 1,900 – 1,915 would shake out the weak bears and set up a better opportunity to go short.”
The S&P 500 pushed to 1,914.46 on Wednesday. Does this mean the rally is over?
Here’s another look at how the media reported the new all-time S&P 500 highs and what it means for stocks going forward:
Simon Maierhofer is the publisher of Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013.
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