They Don't Believe It
Despite this and more powerful evidence, Sonders cited Ned Davis Research's sentiment indicators, which try to aggregate the views of six different sentiment polls of professional money managers. They are "skeptical at best." So am I, but that's hardly a negative factor.
What really caught Sonders off guard in recent months was not the doubt; it was the rage with which some bears have reacted to her interpretation of what looks like a dramatic turnaround. It's perfectly understandable that the 7 million or more Americans who've lost jobs in the past 21 months are singularly unimpressed with a 50% jump in equity prices. But it sure didn't sound like the anger she was hearing was coming from folks on the unemployment line.
A far more likely cause for the anger-at least I thought it was implicit-was that the raging bears had invested a surplus of financial and emotional capital in their gloomy outlook. Maybe they had cashed out at or near the March lows and missed the rebound.
Whatever the reason, she is hardly a raging bull, and she certainly isn't the only one to feel the chill from those who believe hard times lie ahead.
Bears shouldn't feel as if they're the only ones suffering ridicule and humiliation for the market's gyrations over the last two years. In that regard, Mr. Market has distributed shame and embarrassment with a remarkable degree of equanimity.
Normally, cerebral quantitative investors like Jeff Mortimer, the chief investment officer of Schwab's mutual fund unit, find themselves vexed by the V-shaped stock market-to the point where they think it knows more than the rest of us. For Mortimer, that comes after years of relative outperformance.
"The momentum factor has inverted," Mortimer said in an interview on the anniversary of Lehman Brothers' collapse. "This played out like a classic textbook bottom. If you wait until the all-clear sign has been given, all the gains will have been given to others."
Asked about Schwab's highly regarded equity ratings system, Mortimer was philosophical. "Our testing shows the system works 84% of the time and doesn't work 16% of the time," he said.
That system has struggled in 2009, and the firm continues to tweak it. But when it comes to the macro picture, Mortimer says his top-down model aligns closely with Leuthold's right now. Indeed, it was part of what prompted him to reduce the short exposure in Schwab's hedged equity fund from the normal 40% level to 20% late in the first quarter.
"Our model shows the S&P is still undervalued," he noted. "I think we grind higher. If there are surprises, they are [likely to be] on the upside."