Historic Sentiment Shift

Nov 9, 2023

The S&P 500 and Nasdaq have extended their impressive winning streaks and that has resulted in a surge in bullish sentiment.  The latest weekly AAII sentiment survey showed that 42.6% of respondents reported as bullish this week. That is now the highest level of bullish sentiment since the first half of August and perhaps more notably, a major turnaround from last week’s multi-month low of 24.3%.

As shown below, bullish sentiment’s 18.3 percentage point rise week over week is a historically large jump in optimism, especially in more recent years.  That week-over-week increase ranks as the 22nd largest in the survey’s history. It also just barely edged out the 17.88 percentage point increase in November 2020 for the largest one-week increase since July 15, 2010, when it had risen 18.43 percentage points.

The surge in bullish sentiment borrowed heavily from those formerly reporting as bearish.  Bearish sentiment jumped above 50% last week, the highest reading since last December, but was nearly cut in half this week as it came in at only 27.2%

Whereas the jump in bullish sentiment was historically large, the resulting drop in bearish sentiment is even more significant ranking as the fourth largest on record.

Given there were historic moves across both bullish and bearish readings, the bull-bear spread in turn has experienced a top 1% week-over-week move. Only one week ago, the spread indicated that bears outnumbered bulls by a wide margin of 26 percentage points. Rising an astounding 41.4 points week over week, that spread is back in favor of bulls at 15.4.