Sentiment hits an extreme

The public’s current market mindset – especially among inexperienced investors is a reminder of the extremes surrounding the 2000 market top.

According to an early February Deutsche Bank survey of online brokerage users, 61 % are under 34 years of age and 45% are in their first year of investing.

Barron’s reports (Feb. 25): Younger, Savvier Investors Are Making Up a New Movement

There’s no shortage of financial optimism.

SentimenTrader.com’s version of the Panic/Euphoria model had a reading of 1.413 on March 24, 2000, the day of the top in the S&P 500 that led to a 51 % decline, and 1.337 on October 12, 2007, one day after the S&P 500 peaked and started a 58% decline.

On February 12, 2021, one trading day before the high in the NASDAQ, the model shot to a new record at 1.613.

And valuations measured by Shiller’s CAPE hit 37.09 Friday (44.19 is the high reached in Dec 1999).