Bears In Hibernation

The S&P 500’s dip below its 50-DMA and the corresponding rally to new all-time highs did little to dramatically change investor sentiment. This week’s survey results from the AAII saw bullish sentiment fall slightly from 41.1% last week to 40.4%. That is once again within the past several weeks’ range at the lowest level since only two weeks ago.

Bearish sentiment was also lower this week, falling by 2.9 percentage points to 23.3%. As with bullish sentiment, that is the lowest level in two weeks. From a longer-term perspective, bearish sentiment is more than 7 percentage points below its historical average of 30.5%. In other words, while sentiment is not exuberant, it continues to skew optimistic.

The historically muted level of bearish sentiment also shows up in the Investors Intelligence survey of newsletter writers. This week, that reading fell half of one percentage point to 15.8%. That is the lowest percentage of respondents reporting as bearish since March 14th, 2018. Over the past 30 years, there have been only a handful of other periods with lower levels of market pessimism.

Pivoting back to the AAII survey, with bearish sentiment historically muted, a larger share of investors are reporting as neutral. 36.6% of respondents reported as such this week, up 3.9 percentage points from the six-week low last week. 

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