Opinion: You might think investors’ extreme bullishness would be good for stocks. This analysis says you’re wrong

Don’t expect U.S. stocks to mount anything more than an anemic rally in coming weeks. That’s because there’s still too much bullish sentiment. According to contrarian analysis, the most impressive rallies begin when there is widespread pessimism, just as market risk is highest when there is widespread optimism.

Earlier this month was the most recent such occasion. Since then, the Dow Jones Industrial Average DJIA, +0.10% and the NASDAQ Composite index COMP, -0.03% have both fallen 2%. Watch what they do You may wonder how to square this conclusion with that of a recent Deutsche Bank survey, which found a growing “wall of worry” among 550 global market professionals. Specifically, a majority of them now say that they expect a 5% to 10% market pullback between now and the end of the year.

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Too many people have a positive outlook, therefore the stock market can not run up?

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