Mark Hulbert: Robert Shiller created an index that shows investors’ fear of a stock market crash. Here’s what it’s saying now.

by | Oct 15, 2022 | Stock Market

A sizeable majority of individual investors are worried about a possible U.S. stock market crash — and that’s bullish. That’s because crash anxiety is a contrarian indicator. It would be a bad sign if investors were confident that a crash would not occur. So we can take at least some solace from the current widespread worry about a possible crash.

We’re able to study the relationship between the stock market and crash anxiety because of a monthly survey of investors that Yale University finance professor Robert Shiller has been conducting since 2001. One question the survey asks: “What do you think is the probability of a catastrophic stock market crash in the U.S., like that of October 28, 1929, or October 19, 1987, in the next six months?” Shiller expresses the results as the percentage of respondents who believe this probability is less than 10%. Currently, as you can see in the chart below, 22.8% of individual investors believe this probability is that low. The only other times since 2001 when this percentage got any lower was at the bottom of the 2007-2009 and 2011 bear markets. Those certainly are bullish p …

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