The Depths of Pessimism

Here is a chart that appeared in Saturday's edition of The New York Times. It covers more than 40 years and shows the difference between the percentage of Americans who expect their income to rise during the next six months and the percentage who expect their income to fall during that time.

I think this chart is interesting because it confirms the deductions I had made from the material in my media diaries during the past few years.

First of all, this survey data shows the level of economic pessimism reached during 2009 was more extreme (by a wide margin) than any during the past 40 years. This is consistent with the story told by magazine covers and newspaper headlines during 2008 and early 2009. During that time I often remarked that the torrent of pessimism was more extreme than any I had observed in my forty years of market experience.

Second, the five year bull market of 2002-2007 was associated with a lower level of of optimism than any similar bull market/economic expansion during the previous 40 years. This too was apparent in the stream of media commentary that accompanied the bull market. At the time I was astonished at how many investors refused to participate in the long bull swing.

This chart also is another piece of evidence suggesting that the 2009 low point in stock prices was a once-in-a-generation low. I doubt we shall see levels of pessimism like those of early 2009 anytime during the next 30 years.