Bonds are predicted by contrarian investors to beat gold and equities in the upcoming months. This is due to bond market-timers’ current extreme pessimism, which is driving bonds out of favor. Stock and gold market timers, on the other hand, are extremely enthusiastic, often to the point of excessive enthusiasm.
The typical bond-timer has only been more gloomy on 15% of trade days since 2000. On the other end of the sentiment spectrum is the typical market-timer who concentrates on the overall stock market. This average stock-market timer has been more bullish than he is currently on only 4 percent of all trading days over the last 25 years. The typical gold timer is nearly as ebullient; in the last 25 years, the average timer has been more positive 27% of the time than they are now.
Markets are significantly more likely to rise during periods of severe pessimism than excessive optimism, as contrarian experts have long pointed out.
The history of contrarian analysis
Doesn’t the market’s strong performance from the previous year defy the contrarians? Since the stock and gold markets both performed well in 2025 despite broad and enduring investor optimism—the opposite of what contrarian theory suggests—many skeptics are raising this subject. For instance, the 2025 total return of 17.8% for the S&P 500 SPX was significantly higher than its long-term average. Even better, gold (GC00) increased 64.4%.
History is being rewritten by these naysayers. There were notable fluctuations in emotion during 2025, despite the impression that optimism prevailed. And following the mood extremes of the previous year, the markets acted just as contrarians had anticipated.
Hulbert Ratings is the source.
The table above illustrates this. It is a list of all four markets for which sentiment indices are created by my auditing organization. These indices are derived from the average exposure levels of market timers under observation. The timers’ most optimistic 10% of days from the previous year are highlighted in the first column, while their most pessimistic decile is highlighted in the second. As you can see from the third column, the market did noticeably better after extreme pessimism than after extreme optimism in each case.
My auditing organization has been compiling market-timer sentiment indicators since 2000, so this 2025 track record is in line with previous years’ results. And for that reason, contrarians think that bonds should be taken more seriously than stocks or gold.
In other markets, what about timers?
The above chart visually demonstrates why contrarians favor the bond market by presenting the current positions of each of the four market-timer sentiment indicators in relation to their historical values since 2000. The figure also shows an intriguing trend: the general U.S. stock market is far more optimistic than the Nasdaq COMP specifically.
