The AAII weekly sentiment survey remains biased towards a bearish outlook this week, though, bullish sentiment saw a small increase. 24.79% of respondents reported bullish sentiment this week. This small increase was not enough to bring it back into its historical range as it is still over 1 standard deviation from the historical average as shown in the second chart below. As we highlighted last week, these more extreme readings can actually be taken as a good sign for equities, but that is looking at when bearish and neutral remain in their normal ranges. That is no longer the case this week. Start a two-week free trial to Bespoke Institutional to access our interactive economic indicators monitor and much more.
Similar to the bulls, bearish sentiment has risen to an extreme this week. That is the first time that bearish sentiment is at an extreme high while bullish is also at an extreme low since late December 2018. This week’s increase up to 40.08% brings bearish sentiment around 10 percentage points above the historical average. Bearish sentiment has increased at a very rapid pace in May, rising over 18 percentage points over the course of the month. While bearish sentiment had risen to much higher levels through the sell-off in Q4 of last year, the most it rose in a four-week span was 12.91 percentage points. The last time there was as large of an increase in a month was in April of last year, when it rose from 28.49% on March 22nd to 42.75% on April 12th; a 21.42 percentage point move.
Bulls and bears borrowed entirely for the neutral camp as the percentage of investors reporting neutral sentiment fell around 4% to 35.12%. Neutral sentiment continues to be high relative to where it has been historically, but it has also come down considerably from multiyear highs reached earlier in the year.