Bulls Come Crawling Back

Last week, investor sentiment took an overwhelmingly bearish tone following steep market declines on the FOMC’s rate decision, Fed Chair Powell’s ill-received presser, and a remarkably bad Christmas Eve trading session. This week, bulls came back albeit quietly. The rally that equities have seen in the days coming back from Christmas has helped to only slightly lift bullish sentiment. This week’s AAII survey of individual investors saw bullish sentiment rise to 33.02% from 31.55% last week. Still fairly low compared to where it had been most of 2018, bullish sentiment is now well off of lows from early December.

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Bearish sentiment fell this week to 42.8% off of last week’s multi-year high of 50.3%. Bearish sentiment has consistently stayed at an elevated level for a couple months now. Excluding brief periods in the past couple years where bearish sentiment reached similar levels, 2016 was the last time that investors were this bearish for an extended period of time. 

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The large drop in bearish sentiment paired with the small rise in bullish sentiment means that more investors are turning neutral. In other words, given the neutral sentiment level, investors may not be overly optimistic on the bounce we have seen over the past week, but, on the bright side, they do not seem to be as bearish as they previously were either. 

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