Did Donald Trump just do what record highs in the S&P 500 couldn’t? For several months now, consumer and investment sentiment has been anchored by the uncertainty regarding the election and especially over the possibility of what a Trump Presidency would mean for the markets and, more importantly, the economy. One of the best examples of this is the weekly sentiment poll from the American Association of Individual Investors (AAII). Even though the S&P 500 has essentially been at or near all-time highs for much of 2016, bullish sentiment on the part of individual investors has been stuck below 40% for a record 54 straight weeks and 88 of the last 89 weeks.
This week, AAII’s bullish sentiment reading still came in below 40%, but it has came closer to that level than any other point in the last year. According to this week’s survey, bullish sentiment
increased surged from 23.64% up to 38.89%, representing the largest one-week increase since July 2010. That’s six years! To be fair, AAII’s weekly poll is conducted from Thursday through Wednesday, so the bulk of this week’s responses were more than likely tabulated prior to the election, and even prior to the Comey letter saying that nothing had changed in the FBI’s decision not to recommend indicting Clinton. That being said, in a year where the so-called establishment has been proven to be so disconnected with the views and opinions of the overall population, it is only fitting that a survey of bullish sentiment among individual investors surged the most in six years at the same time as the biggest US political upset in at least a generation, if not history. It will be really interesting to see where this reading stands next week.
While bullish sentiment surged, bearish sentiment declined but not nearly by as much as the magnitude of bullish sentiment. It still fell below 30%, which is the lowest level in five weeks.
Neutral sentiment was also of note this week, and illustrated the fact that the passing of uncertainty regarding the election really impacted sentiment. In this week’s survey, neutral sentiment declined from 42.05% down to 31.78%, which is the lowest level since January.