The latest weekly sentiment surveys would have missed any reaction to the FOMC yesterday due to timing of data collection. However, leading up to equities' drop in reaction to a hawkish Fed, sentiment was already headed in a pessimistic direction. As shown below, the American Association of Individual Investors weekly sentiment survey saw bullish sentiment drop for a second week in a row last week. At 31.3% bullish, sentiment is down to the lowest level since June.

Bearish sentiment rose from 29.2% up to 34.6%. That is only the highest reading in a month given neutral sentiment picked up a larger share of losses to bullish sentiment the previous week.

While the increase in respondents reporting as bearish has been somewhat tame, the inverse moves this week have resulted in the bull-bear spread dipping back into negative territory. That means there are currently more investors reporting as bearish than bullish.

Below, we take a rolling average of the past year's readings in bullish and bearish sentiment. By this measure, bears again hold the upper hand having averaged 38.0% in the past year whereas bulls have averaged 30.4%. In the case of bullish sentiment, that remains a historically low reading as the average has generally trended lower over the past two decades while the reverse is true of bearish sentiment. That being said, there has been some reversion over the past few months with bearish sentiment falling and bullish sentiment rising towards more historically normal readings. In other words, over time, sentiment has taken a structurally higher bearish tilt, and 2022 saw that nearly reach a pinnacle. This year, though, has seen somewhat more normal but still elevated sentiment.

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