Economists Are Bullish. Should YOU Be? | Elliott Wave International

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Economists Are Bullish. Should YOU Be?
Before you answer that, take a look at the chart below

By Vadim Pokhlebkin
Thu, 03 Nov 2011 17:30:00 ET

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Please read these financial news headlines and then take a guess as to when they were published:

Fed chief predicts economy will rebound despite housing woes (AP)
IMF predicts an energetic world economy (StarTribune.com)
Job Growth Strengthens Economy (Washington Post)
Several Signs the Economy Is Reviving (New York Times)

Did they publish this week? Last week? Last month?

No.

These headlines published in April-July, 2007 -- right before the 2007-2009 global financial crisis crushed the world markets. This DJIA chart (courtesy: Bloomberg) makes it clear just how mismatched the economists' expectations were with reality:

"So what," someone might say -- "The economists blew it big time in 2007, but how's that relevant today?"

This quote from the current issue of our Elliott Wave Financial Forecast explains:

"...most [economists] still say there’s less than a 50% chance of a 'recession'... In recent speeches, Fed chairman Ben Bernanke has been careful to note that he continues to think that the American economy has a bright future."

And:

"Despite the recent market decline...the bullish bias of investors remains solidly in place. ...this condition is readily apparent in the ICI mutual fund cash-to-assets ratio, which hit a 50-year record low of 3.3% in July. The torrential selling of early August barely reversed the needle, raising the ratio to just 3.4%. 'Money Managers See Opportunities in Stocks,' says a September 29 USA Today headline. In the latest poll, 57% 'see a buying opportunity.'"

To most investors, such bullishness is reassuring. But then, most investors have very, very short memories.

You don't have to be one of them. Our most popular risk-free subscription package, The Financial Forecast Service, puts today's market sentiment in perspective.

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Tags: Dow Jones Industrial Average (DJIA), Elliott Wave trading, Elliott wave, Nasdaq Composite, recession, S&P 500

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