Individual Investors Ironically Turn Bullish

This may be hard to believe after the past few days, but individual investors’ outlook on markets from the AAII survey actually saw a bump in bullish sentiment this week.  Bullish sentiment rose for the second week in a row to 37.94% from last week’s 33.88%.  This is off of one of the lowest readings of the year from only a few weeks ago.

As always, as bullish sentiment rose, bearish sentiment took a hit returning back towards the historical average.  Bearish sentiment fell to 30.5%.  This is well off the high of 47.14% hit a couple weeks ago.

Neutral sentiment also saw a decent bump this week rising to 31.55%.  Coming off of lows, this could indicate that investors are growing increasingly uncertain with how markets have performed recently.

As we mentioned last week, much of the more optimistic outlook from this week’s survey likely came as the result of Fed Chair Powell’s speech. Seeing as the survey polling closes Wednesday, this week’s results may not have fully taken into account Tuesday’s stock rout; just as last week’s survey likely did not take into account Powell’s speech. In other words, as the expected rise in bullish sentiment came this week, next week we should expect to see a rise in bearish sentiment especially if this price action keeps up.

Individual Investors Turn Positive

The AAII survey on individual investor sentiment released this morning saw a more positive turn after last week’s extremely bearish reading.  The post-Thanksgiving gains experienced so far this week helped to boost sentiment to 33.88% from last week’s low 25.25%.  This is slightly lower than what we have seen most of the year, but much more in line with recent months.

Last week saw the highest reading for bearish sentiment since February 2016. Bearish sentiment for this week fell to 39.5% from 47.1%. While this is certainly a large drop, it is still at an elevated level that hasn’t been seen since the spring.

Neutral sentiment saw a small decline from 27.61% to 26.64% with this loss most likely going towards the bullish camp.

Important to note about this week’s survey is that the impact of Fed Chair Powell’s remarks are likely to not be seen due to timing.  With the speech occurring mid-day yesterday, most respondents had already reported.  If yesterday’s price action in response to the speech is any indication, we should expect to see some fairly large changes benefiting bullish sentiment in next week’s survey.  Also between now and then will be the G20, and more importantly, the meeting between President Trump and Chinese President Xi Jinping.  This is yet another would-be catalyst that investors are watching as a tell on where trade policy will go.  Some type of agreement between the two presidents could supplement the probable increase in bullish sentiment next week.

Individual Investors Showing Uncertainty

The weekly AAII survey released this morning showed the first downtick in bullish sentiment (41.28% down to 35.09%) in three weeks.  Given the weakness in the broader equity market, the move lower in bullish sentiment is completely understandable.

As equity prices have fallen over the past week, bearish sentiment rose to 35.96%.  This week’s bearish reading is right around what we saw for most of October, so much like bullish sentiment, it is right within it recent range.

Neutral sentiment moved only slightly higher this week, as shown in the chart below.

Individual Investors Continue To Be Optimistic

The sentiment of individual investors in the weekly AAII survey saw a huge jump in bullishness last week. This week, while the number did not skyrocket, there was another increase after a solid week of equity market gains. The bullish camp saw a 3.4 percentage point increase to 41.28% from 37.93%.

Bearish sentiment fell to 31.19% from 34.48%.  It is now well below the high of 41% from only a couple weeks ago. According to these sentiment levels, it would be fair to say any fear stemming from the October decline has now tapered off.

The share of investors sitting on the fence went basically unchanged, only falling 0.07%. Suffice to say that the influx of bulls has not come from the neutral camp.

Individual Investors Reverse

Last week on the backs of negative price action, bullish sentiment fell sharply to the fourth lowest reading this year.  According to the weekly survey from AAII, there has been quite the turn around this week as bullish sentiment jumped from just under 28% all the way up to 37.9%.  This is actually just above the average of the year and an impressive improvement in a short span of time.  If the rally from the last two days of October continues throughout the week, we should expect to see bullish sentiment increase once again next week.

Conversely, the bearish camp shrunk this week to 34.5%.  While this is lower than last week, it is still at fairly elevated levels compared to most of the year and is about in line with readings from early October.

Neutral sentiment fell to its lowest since February 1st of this year.  Investors seem to be increasingly taking sides with most leaving the bearish camp for the bulls.