After a strong week for US equities last week and another positive performance so far this week, you would expect bearish sentiment on the part of individual investors to decline. Not only did we see that this week, but what was surprising was that we also saw a decline in bullish sentiment. According to the weekly sentiment survey from the American Association of Individual Investors (AAII), bullish sentiment declined from 34.65% down to 33.26%. This represents 25 straight weeks where bullish sentiment was below average and the 29th week where bullish sentiment was less than 40%. In the history of AAII’s survey, there has only been one other period where bullish sentiment was below 40% for as long as it has been now, and that was also a 29 week period spanning from April through October of 1993.
While bullish sentiment saw a small decline this week, bearish sentiment saw a much larger decline, falling from 35.01% down to 29.13% for its first sub 30% bearish sentiment reading since late July. With the declines in both the bullish and bearish camps, the neutral camp rose to 37.6% as investors are reticent to take a stand in either direction ahead of today’s Fed announcement.