I’ve mentioned a few times in the past few weeks that investor sentiment has gotten too bullish and complacency has gotten too prevalant. I don’t want to sound like a broken record, but the datapoints are piling up and should not be ignored. I wrote recently that the rest of 2010 would be bullish and that is what has come to pass, but soon there has to be much more fear in the marketplace for stocks to continue higher. In my browsing, I found two charts that prove how the positive sentiment is spilling over into 2011.
All Systems Go
Take a look at the first chart from Bespoke Investment Group which shows the major investment houses’ predictions for where the S&P 500 will end up in 2011. All of the firms are predicting that the venerable index will end higher and the average gain will be over 10%. Usually there are a few prognostications that go against the grain and predict a lousy year, but that isn’t the case this year. The unanimity should be concerning for all of the contrarians in the house. To be fair, the consensus for 2010 was actually pretty close to the current level. Then again, it will be harder to build on the explosive gains seen since August.
Deutsch Bank is going all out and saying the S&P 500 will soar over 25%! That is quite a move and it suggests that they see the Fed’s plan working out perfectly, GDP growing over 4%, inflation behaving, the European debt crisis clearing up without a hitch, and perhaps most importantly, unemployment taking a huge plunge. These are all possible, but that would be the most ideal of worlds.
The second chart comes from Nomura and is a survey of its clients. It asks what asset class will be the best performer in 2011. As you can see, equities are a runaway choice for them. Again, this is a red flag for the contrarians out there. As John Hussman of the Hussman funds said, “agreement among experts is not your friend.” He mentioned how there was not a bear in the group at the Barrons Roundtable in 1972, which was the beginning of a 50% plunge for stocks. I’m not saying that will happen next year, but the red flags of complacency and bullishness are surely there.
Two More Examples of Overexuberance is an article from: 
