A trader reacts as he works on the floor of the New York Stock Exchange (NYSE) in New York, U.S., March 18, 2020Lucas Jackson/Reuters
- More Americans view gold as a better investment than stocks for the first time since 2013.
- That’s a good sign for the stock market, according to the Carson Group’s Ryan Detrick.
- “From a contrarian point of view, this is another reason to think the path is higher for stocks,” Detrick said.
More Americans view gold as a better long-term investment than stocks for the first time since 2013, according to a recent survey from Gallup.
That view of the precious metal is actually a good sign for the stock market, according to Carson Group’s chief equity strategist Ryan Detrick, who highlighted that usually when the crowd is bearish on stocks, it pays to be bullish.
“One reason to expect higher equity prices [is] that the masses keep betting on lower prices. This matters as the crowd is rarely right looking back at history,” Detrick said in a recent note.
According to the survey, 26% of Americans view gold as the best long-term investment, which is a near double from its level of 15% in 2022. Meanwhile, Americans that view stocks as the best long-term investment fell to 18% this year from 25% last year, representing its lowest level since 2011.
“Given how poorly stocks did last year and the constant barrage of negative news, maybe this isn’t a surprise, but from a contrarian point of view, this is another reason to think the path is higher for stocks,” Detrick said.
Despite the negative view from American investors, there are plenty of reasons why investors should stay bullish on the stock market, according to Detrick.
For one, the Federal Reserve is likely on the verge of wrapping up its rate hike campaign as inflation continues to cool. Fed Funds Futures currently suggest an 83% chance that the central bank opts not to hike interest rates at its June FOMC meeting.
“The bottom line is stocks tend to do quite well [after the last Fed rate hike], higher a year later eight out of ten times and up a very impressive 14.3% on average,” Detrick said.
And the economic outlook is starting to brighten based on a recent New York Fed survey of business leaders, which showed that expectations for business activity in the next six months are at the highest level since September 2022.
“I find this worthwhile, as [the survey] focuses on the New York and New Jersey area, in other words, the heart of the banking world. If most of these business leaders see better times coming, that is something the bulls should embrace,” Detrick said.
With the outlook starting to improve for the economy, investors should be better served by investing in stocks rather than gold, but that’s not how investors are positioned. And that negative sentiment is the fuel that could ultimately drive the stock market higher from here.
