Bull Market Surprise: Investor Sentiment Hits Three-Year High

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We have been tracking and talking about the move into stocks and out of cash and bonds for some time now. We also would be quick to point out that if investors are just now getting bullish, then they really need to scratch their heads and ask where they have been for so long. A new report from John Hancock shows that investor sentiment reached a new high in the first quarter.

The John Hancock Investor Sentiment Survey results were based on responses from 1,066 investors. Those surveyed had to participate in the financial decision making in the house, and they had to have a minimum of $75,000 in income and a minimum of $100,000 in assets. The margin of error would be plus or minus 3.06 percentage points at the 95 percent confidence level. Investors cited health care costs and political gridlock as their chief concerns.

The John Hancock Investor Sentiment Index rose by six points to 24 in the first quarter of 2013. The figure was 18 in the final quarter of 2012. The gains are being tied to significantly more positive attitudes toward investing in stocks, balanced mutual funds and even in their own homes. The prior high score was 22, and that was back in the first quarter of 2011.

Unfortunately, John Hancock only launched this index in the first quarter of 2011. Its lowest reading was in the third quarter of 2011. Apparently cash is not king. Some 64% of investors signaled that this is now a bad time to hold on to cash. Some 72% of those surveyed believe that 2013 will be a positive year for the average and 68% are optimistic that the economy will be stronger two years from now.

Investors in the first quarter showed that a significantly larger portion of them think that now is a good time to invest in stocks. This rose to 58% in the first quarter from 48% the prior quarter. The number of investors who believe now is a good time to invest in balanced mutual funds also went up handily. That percentage rose to 57%, versus just 50% in the fourth quarter of 2012. Investors showed that blue chips are perceived to have the best short-term outlook and that 401(k) investing is on the rise.

We also see more evidence that real estate is back. The index showed that one’s own home was viewed as a good investment by 65%, and real estate in general was put at 64%.