Investment Advisers Optimistic For 1996 Contrarians Would See Cause For Concern In Hopeful Outlook

The share of U.S. investment advisors who say they’re optimistic about U.S. stocks climbed to its highest point since Christmas 1992, according to a poll taken two weeks ago by Investors Intelligence newsletter.

Meanwhile, the share saying they’re pessimistic about the outlook for stocks fell to its lowest point since June 1993.

The rising optimism and dwindling pessimism may worry investors who look for contrarian indicators. These contrarians, who try to bet against the crowd rather than with it, feel that when more people say they’re optimistic about stocks, most have already finished buying - a bad omen for future stock-market performance.

Conversely, when people predict stocks will fall - as many investors did in December 1994 - most have already sold their holdings and a rally becomes far more likely, contrarians say. Since Dec. 8, 1994, the Standard & Poor’s 500 Index has posted a return of 41.9 percent, including reinvested dividends.

According to 140 advisers polled by Investors Intelligence, optimism about stocks grew and bearishness continues to decline.

The share of advisers who expect the stock market to advance rose to 49.2 percent. A month prior, the percentage of bullish advisers was 39.2 percent.

The proportion of advisors who described their views as out-and-out bearish slumped to 30 percent. The share totaled 36 percent a month earlier.

Immediately before the 1987 stock-market crash, about 60 percent of advisors were bullish, while the percentage of bears numbered just 19 percent.

Advisers’ rising optimism was tallied just after the Dow Jones Industrial Average tumbled 101.52 points, or 1.96 percent, its biggest percentage decline since Nov. 22, 1994.

About 20 percent of advisers said they foresee a “correction,” or relatively brief decline in share prices.