The S&P 500 is up 20% from the October lows and predictably more and more investors are bullish on continued gains. Price leads sentiment.
The latest AAII survey published yesterday shows the largest number of bulls in a year after a massive 15% jump to 44% from just the previous week, while bearish sentiment plummeted to 24%. Compare that to the week ending 9/21/22 (close to the bottom in stocks) when 60% of investors were bearish.
Source: American Association of Individual Investors, as of 6/7/2023
Looking more wholistically at sentiment with measures from BofA, Goldman, equity flows, and Investors Intelligence to name a few, we can say that investors are no longer historically pessimistic. And quite frankly, that’s a good thing. Bull markets need bulls.
Here is the Investors Intelligence survey going back a few years. I crudely shaded in yellow the times when there were 20% more bulls than bears according to this survey. These were fantastic times to be an equity investor with gains of roughly 40%, 25%, and 65% in the S&P 500. If prices continue to rise, more and more investors will become optimistic. It’s natural. And at some point, in the future, we have to watch for the opposite signs – euphoria. But that is seemingly a ways away.
Source: Hi Mount Research, as of 6/6/23
Source: Stockcharts, as of 6/7/23
Sean Dillon, CMT, CFTe
SVP, Investment Strategy
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