Investor Emotional Cycle Is Alive And Well

Madness and mayhem are the order of the day, while consumer and business sentiment are dour, and for-sale signs are popping up like measles.Meanwhile, equity markets are priced for nirvana, and participants are the most long of all time. Households and nonprofit organizations entered 2026 with a record near half of their financial assets held in equities—the most ever (shown below since 1952). Professional fund managers are positioned with the highest equity exposure and growth expectations since the market top in 2021 (shown below since 2001, courtesy of The Daily Shot). At the same time, global managers are holding the least downside protection hedges since the 2021 market top (below since 2008). Fund manager cash levels at 3.2% are the lowest on record since at least 1999 (shown below). The bear market is in dry powder; cash on hand has never been so low. As real estate investors have been discovering, when sellers wish/need to sell en masse at high prices, there are few willing and able buyers to be found. Spring listings are looking to start early this year. See, BMO economist says real estate has entered a ‘slow grind’ toward affordability:Andre Kutyan, broker with Harvey Kalles Real Estate, began photographing the pools and landscaping of some houses last fall in preparation for hitting the market early in the New Year, when they may still be buried under a layer of snow.He plans to start launching new listings in mid-January.“I’m curious to see how early the spring market will start this year,” he says.Agents are also watching to see how much supply arrives on the resale market.Many are hearing from baby boomers who have been holding onto their large homes with hopes of a recovery in prices, but have now decided to move ahead with a sale.Some homeowners with high-priced properties are also choosing to downsize their investment as economic uncertainty continues.“You can only wait so long,” he [BMO economist, Robert Kavcic] says of the sellers. “There’s a cost to waiting, too.”The attitude among buyers at the moment appears to be a reverse FOMO, or “fear of missing out,” he says.This is all classic. Humans are wired to self-sabotage in financial matters, and it takes discipline and forethought to resist groupthink. Opportunity arrives for patient buyers holding cash who’ve prepared their buy targets in advance.The investor emotional cycle has not been repealed, and we now have emojis to help express it. More By This Author:Madness And Mayhem Continues In January Jubilant Hopes For 2026 The Truth About Tax Rates