The Leuthold Group’s Doug Ramsey on the psychology that drives bull markets:
Cashing in on bull markets is not a matter of waiting for everything to line up, anyway. There must be a set of intellectually appealing bear arguments keeping some players on the sidelines…it is these same players who will eventually drive prices even higher when “new” and intellectually appealing bull arguments belatedly appear on the scene. I have found that some of the best bull market action occurs when the “bull/bear” arguments superficially appear to be in relative balance, confounding many market players. When the balance tips too heavily to one side or the other, the odds are that most of the related market move is already in the books.
—-this article originally appeared 3/3/2010. Thinking about this paradox is one of the things that led us to start our own sentiment survey focusing on client investment behavior. Even now, many years into the bull market, clients are still behaving fairly cautiously, indicating they do not yet fully believe the bull argument.