Bulls Come Home for the Holidays

Dec 29, 2022

The last week of the year also brings in the last reading on investor sentiment for 2022. Perhaps a bout of new year’s optimism has overridden the negative impact of the market’s continued decline, but bullish sentiment actually rebounded up to 26.5% after spending four straight weeks below 25%. That leaves the reading right in the middle of the past year’s range.

Bearish sentiment, on the other hand, fell from a recent high of 52.3% down to 47.6%. Unlike bullish sentiment, that level remains a bit more elevated.  Outside of last week’s 50%+ reading, it would have been the highest reading since October 20th.

In spite of a slightly more bullish tilt, this week’s data continues to show sentiment is dominated by bears. The bull-bear spread favors bears by 21.1 percentage points; the third week in a row with a sub -20 reading.

Not all of the gains to the bullish camp came from the bears.  The share of respondents reporting neutral sentiment was also lower this week falling for the fourth week in a row.  This week’s 1.5 percentage point drop was the smallest of that four-week span but brings the indicator to the lowest level since October 20th. Click here to learn more about Bespoke’s premium stock market research service.

2022 Solidified as the Worst Year for Sentiment

Dec 29, 2022

As we noted in an earlier post, today’s release of the AAII survey gives us the final reading of the year on sentiment, solidifying a number of points as to just how dour the investor outlook has been.

For starters, the bull-bear spread heavily favors bears, and that has been the case for some time now.  As shown below, the spread has been negative (meaning a higher share of respondents are reporting as bearish than bullish) for a record 39 weeks in a row- over a month longer than the previous record which occurred recently in 2020.

Across all weeks in 2022, bullish sentiment averaged a reading of merely 24.73%.  Since the survey began in 1987, that is a record low.  In fact, the previous lowest readings were a few percentage points higher at 27.29% and 27.08% in 1988 and 1990, respectively.  Meanwhile, the average reading on bearish sentiment was historically elevated at a record of 46.2%, surpassing the prior record set in 2008 by one percentage point. Prior to 2008/2009, only 1990 saw a very high average reading for bearish sentiment.

As we highlighted in an earlier tweet, given the low readings on bullish sentiment, there was not even a single week this year in which bullish sentiment came in above its historical average of  37.63%. Of course with a low share of survey respondents reporting as bullish, a larger share would be reporting as bearish. To match the impressive reading with no weeks seeing above-average bullish sentiment, nearly every week this year (51) has seen bearish sentiment come in above its historical average of 31%, tying the record high set in 2009.

As previously mentioned, bullish sentiment averaged a reading below 25% this year. Given that reading, it should come as no surprise that 2022 also saw a record number of weeks (30) with bulls below 25%. Prior to this year, 1988 (one year after the survey began) was the prior record at 23 weeks. In other words, this year there were nearly two months more in which less than a quarter of investors reported as bullish than the previous record. Additionally, there had been 17 weeks in which over half of the responses were bearish.  Similar to the number of weeks in which bearish sentiment was above average, that ties 2008 for the record high.  Click here to learn more about Bespoke’s premium stock market research service.

Continuing Claims Top 1.7 Million

Dec 29, 2022

Initial jobless claims have not been of particular interest recently as the weekly indicator has seen choppy week-to-week moves that have yet to set any major new high or low.  In the latest release, seasonally adjusted claims rose to 225K, matching expectations for the highest reading since the first week of the month.  Looking at the four-week moving average to smooth out some of the choppiness, the number has fallen to 221K. This week was the third sequential decline in a row for the lowest reading since early November.

On a non-seasonally adjusted basis, claims tend to drift higher at the end of the year and into the new year.  For example, the current week of the year has historically seen unadjusted claims rise week over week 90% of the time since the data begins in 1967. That seasonal drift has appeared this year but to a lesser degree as the past couple of weeks’ increase in claims has been slightly less strong than normal.  Given this, claims are well below comparable readings from the years prior to the pandemic and up only slightly versus this point last year.

Continuing claims remain the more worrisome portion of the weekly jobless claims report.  The reading has continued to rise rapidly as this week’s reading eclipsed 1.7 million for the first time since February.

There are plenty of ways of measuring how fast continuing claims have risen, but looking at the 3-month rate of change, claims are up over 25%.  As shown below, this large of an increase has never occurred outside of a recession. Click here to learn more about Bespoke’s premium stock market research service.