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Alternative Market Briefing

Comment: Expecting volatility in 2017? A case for diversifying

Friday, January 13, 2017

Matthias Knab, Opalesque:

Wells Fargo Asset Management writes on Harvest Exchange:

Optimism is surging. Consumer confidence recently hit levels not seen since 2001. Investor sentiment is also up, according to the fourth-quarter Wells Fargo/Gallup Investor and Retirement Optimism Index, which reached a nine-year high at +96, up from +79. The index also showed that 37% of respondents expect U.S. election results to have a major impact on their net worth.

Many market strategists say that when individuals are getting bullish, it's time to get bearish. I disagree. Optimism is not a reason to get pessimistic. There's often a difference between how people say they feel and how they act. For example, rising consumer confidence does not regularly result in future retail sales growth.

Confidence does a better job of reflecting what consumers have already done, rather than predicting what they will do. For investors, optimism can mean many things, but it doesn't automatically translate into market gains. For that, perhaps the best gauge is whether stock prices move upward "but again, this reflects what people have done.

So what might investors do in 2017, given their uptick in optimism? A good place to start is their outlook for how the market will move. While many investors say they're feeling optimistic, they......................

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