SI's Consensus Watch Blog

CONSENSUS SENTIMENT: POSITIVE (Bear Market Indicator)

Wall Street investment strategists and money managers responding to a CNBC Trillion Dollar Snap Survey are generally bullish on the stock market for the month of September.   After a turbulent July and August, 65% of those responding say we've "seen the bottom of the stock market correction."  For the August survey, a smaller majority of 55% thought the worst was over.

Most of those answering our survey today are expecting a good month for stocks.  39% say the benchmark S&P 500 stock index will be up 1% or more, with 13% predicting a spectacular gain of 5% or more.  31% of those responding are expecting the S&P to drop 1% or more, and 30% are forecasting either no change or a slight increase.

The Trillion Dollar Survey also shows expectations for a Federal Reserve Fed Funds rate cut are much stronger today than they were just over two weeks ago, which may help explain the bullish stock outlook.

In the August 17 survey, 54% of those responding predicted the Federal Reserve would not cut its Federal Funds target interest rates at or before its meeting on September 18.  Now only 20% see no action coming this month, with 74% predicting a 25 basis point cut at the September meeting and another 3% calling for the cut to come before the meeting.

Consensus Watch’s Take: The Institutional Consensus called for a strong September. What is the result so far? The Dow is down 1.2 percent and the S&P500 is down 0.3 percent. Positive Consensus leads to negative results. I wish their calls would be true so they could be taken seriously, but unfortunately is just doesn’t pan out that way. They are bullish, mainly because they expect the Fed to come and save the day. They might just as well given the hangover in the housing market, and the epiphany from the US employment report that American’s are starting to lose their jobs. I believe we have more pain to come, but this presents great opportunities to slowly build positions in equities that have been beaten up.

AKR