As we noted in last Thursday’s Chart of the Day, sentiment as measured by the American Association of Individual Investors’ (AAII) weekly survey absolutely blew the doors off. More than half of respondents reported bullish sentiment—the highest bullish sentiment reading since January 2018—with the week over week increase the largest in over a decade. Turning to this week, bullish sentiment remains at the high end of the past several years’ range, but there was a significant moderation as only 44.35% report as bullish. That 11.5 percentage point turnaround was the largest drop in bullish sentiment since January 30th. In the history of the survey going back to the late 1980s, there have been 74 other weeks in which bullish sentiment has dropped at least 10 percentage points from a reading above 50%.
Compared to that double-digit move, bearish sentiment only rose 1.49 percentage points. That is, those that are no longer reporting as bullish did not necessarily turn around to take a pessimistic view this week. Currently, just over a quarter of respondents reported as bearish which is still muted relative to the past year’s readings and is still below the survey’s historical average of 30.63%.
Given bullish sentiment fell double digits and bearish sentiment saw a comparatively tiny move, investors appeared to be less polarized this week as neutral sentiment made up the difference rising exactly 10 percentage points. Staying true to round numbers, this was only the 100th time in the history of the survey that neutral sentiment rose double digits in a single week. After last week’s historically low reading of 19.29% (in the bottom 7.5% of all readings), neutral sentiment is now back up to 29.29% which is within a couple of percentage points of the historical average.
While that combination of higher neutral sentiment reading plus lower bullish sentiment points to things being less polarized than they were last week, sentiment still does not largely favor the bulls. As shown below, the bull-bear spread is now at 17.99 which remains at the high end of the past few years’ readings. Click here to view Bespoke’s premium membership options for our best research available.