Sturdy Sentiment

Feb 15, 2024

With the S&P 500 pulling back in the past week, sentiment has likewise taken a less optimistic tone.  This week’s AAII sentiment survey showed 42.2% of respondents report as bullish compared to 49% one week ago.  Although that is lower, the bullish reading is still well above the historical average of 37.6% and is only at its lowest level since the end of January.

While sentiment currently holds a bullish bias, things are not exactly extreme. For example, back in December more than half of respondents reported as bullish and the current level of bulls only ranks in the 69th percentile of all weeks on record. What is perhaps more impressive is how consistently sentiment has stood at bullish levels.  As shown below, over the past four months 87.5% of weeks have seen bullish sentiment come in above 40%.  Such consistency of this level of bullishness has not been observed since April and May of 2021.  Prior to that, you’d have to go back to January 2015 to find as elevated of a reading.

Meanwhile, bearish sentiment ticked up from 22.6% last week to 26.8% this week. That is the highest reading in a month, but inverse to bullish sentiment, it remains well below the historical average of 31%.

Given there has been consistent readings of bulls above 40%, there is also an impressive streak for bearish sentiment. This week marked the fifteenth consecutive time that bearish sentiment has come in below 30%.  That is currently the longest streak since July 2021, and prior to that, there have only been a handful of other streaks that have lasted as long.  There was another 15 week long streak that ended in January 2014 but you’d have to travel back another decade to find the next streak of similar length.