Despite the July 4th holiday, the American Association of Individual Investors (AAII) released their weekly readings on investor sentiment last Thursday. With the S&P 500 closing at all-time highs multiple times last week, bullish sentiment has continued to improve. Increasing by 3.57 percentage points to 33.16%, bullish sentiment now sits at its highest level since early May in what has been a steady recovery from the drop in sentiment as a result of the May pullback. This release also marked the fourth straight week with an uptick in bullish sentiment; the longest such streak since January 10th (also at 4 weeks) when sentiment was recovering from the depths of the Q4 2018 sell-off. Although bullish sentiment has recovered as the market has reached new highs, it is still fairly subdued by historical standards. At the current reading of 33.16%, it is only in the 14th percentile of readings when the S&P 500 has reached an all-time high within the past week. On average, bullish sentiment has been at 42.07% when new all-time highs are hit (since 1987).
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Meanwhile, bearish sentiment actually saw a small 0.3 percentage point increase, snapping a three-week long streak of declines. Readings of pessimism are essentially mirroring bullish readings in that it is still a bit elevated with the market at record highs. As with bullish sentiment, given price action, this is a bit unusual as bearish sentiment is in the 88th percentile of readings when the S&P 500 reached a new high within the past week. At 32.35%, it is also above the average of 25.29% for bearish sentiment when new highs are reached.
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Bulls and bears both borrowed from the neutral camp last week as the percentage of respondents reporting neutral sentiment fell from 38.36% to 34.49%. This brings it to the lower end of its recent range and to its lowest level since mid-May. Given this decrease, sentiment is pretty evenly split amongst the bullish, bearish, and neutral camps.
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