The past week has seen the S&P 500 regain some of its losses as yesterday’s close ran right up to the high from one week prior.  In spite of that rally, sentiment has shifted lower with the percentage of respondents to the weekly AAII sentiment survey reporting as bullish falling back below 25% this week after two weeks of higher bullish sentiment readings.

While bulls were lower, bearish sentiment actually experienced another large decline falling from 43.7% last week to 35.5%.  That is the lowest level of bearish sentiment since the first week of the year, though it remains above the historical average reading of 30.5%. The two-week decline in bearish sentiment now stands at 17.4 percentage points which is the largest two-week decline since January 2019 when it had fallen over 20 percentage points.

As a result of the moves in bullish and bearish sentiment, overall tones among individual investors remain pessimistic albeit less so than the past couple of weeks.

Given that both bullish and bearish sentiment fell, neutral sentiment borrowed from both readings. Jumping 10.3 percentage points from last week, it was the first time neutral sentiment rose by double-digit percentages week over week since September of last year. While that increase several months ago was actually larger than this week’s rise, the actual level of neutral sentiment is higher this time around.  At 40.2%, neutral sentiment saw the highest reading since the first week of 2020.

Crossing above 40%, neutral sentiment is reaching the upper end of its historical distribution of readings. In the past when a similar percentage of respondents have reported that they expect the S&P 500 to be flat in the next six months, the S&P 500 has actually tended to consistently perform positively with longer-term outperformance relative to the norm.  Click here to view Bespoke’s premium membership options.