A “Mental Reset” for the Markets

Oct 22, 2022

The LikeFolio Investor Fear Index measures the velocity of social media mentions where users are indicating negative investor sentiment.

As you can see in the chart above, this fear level spiked to multi-year highs as the market reversed course and headed lower at the beginning of 2022.

Then, when the market dropped over 10% in the first two weeks of June, the LikeFolio Fear Index shot higher again but made a lower high than the prior spike.

Now, as stocks grind near 2022 lows, the LikeFolio Fear Index seems to be putting the top on another spike, which is once again lower than the fear level we hit during the previous market drop.

This action tells me that investors are in the process of “resetting” their expectations.

What was the stuff of nightmares in January (S&P 500 dropping below 4,300), has suddenly become a new normal.

As a result of this “mental reset,” investors are not just dismissing the fears that led to some emotional selling earlier this year… they’re actually starting to get bullish and interested in buying stocks again:

Not only that, but after a brutal 2022 for cryptocurrencies, LikeFolio is picking up strong signals that investors have a renewed interest in purchasing cryptos:

Of course, this decline in fear and “mental reset” doesn’t necessarily mean that the worst of the stock and crypto market declines are behind us.

But renewed confidence is a key element of a bullish reversal… and so far, we’re seeing solid signals that investors are ready to get back in the game.