Investors Seem Bipolar But Are Probably Just Smart

By Raul Elizalde

NEW YORK (AdviceIQ) -- Here's a paradox: Folks are not optimistic about the new year's investment prospects, but still want to invest more. That sounds like bipolar disorder, when it comes to investing at least, has swept the public.

A survey by The Associated Press finds that most Americans think the stock market will not go up this year. About 40% believe stocks will be just about where they are now at the end of 2014, and almost another 40% predict it will go down. While very few think it will crash, the percentage of bulls is a dismal 14%.

We certainly don't disagree on the downbeat forecast. Back in late October we published a newsletter saying basically the same thing (Don't expect a bull market in 2014). Bullish sentiment ran high at the time, and the fact that popular thinking changed so quickly to align with ours is somewhat unsettling. Crowds tend to be wrong. But the AP poll had other questions that probed deeper into people's thoughts.

That's where the paradox comes in. While almost 80% say they didn't think market will go up, about 77% plan to invest as much, or more heavily, in the coming year. Only 22% plan to pull back.

It is easy to dismiss this blatant contradiction as another proof of how irrational people truly are. But these results may also show that people are wiser than these answers reveal.