The news of the FOMC’s hawkish meeting minutes and the subsequent declines in markets in reaction to the release likely was not fully captured in sentiment indicators this week due to the timing of collection periods. Nonetheless, respondents to the AAII survey did show a drop in optimism with only 32.8% of respondents reporting as bullish versus 37.7% last week. While back below the historical average, bullish sentiment is not extremely extended below or outside of the recent range of readings.
Bearish sentiment picked up the larger portion of those losses rising from 30.5% last week to 33.3% which is only a few percentage points above the historical average (30.6%).
As a result of these moves, the bull-bear spread dipped back into negative territory, albeit not by much, after last week saw the first positive reading in five weeks.
Neutral sentiment picked up the difference rising 2.1 percentage points to 33.9%. As with bearish sentiment, even with that increase, the reading remains below levels from just two weeks ago.
Out of three sentiment surveys—AAII, Investors Intelligence, and the NAAIM Exposure Index—the AAII reading is released the latest of the three, and as such was most likely to pick up any reaction to Wednesday’s declines. As such, both the Investors Intelligence and NAAIM Index saw more bullish readings this week. In fact, the Investors Intelligence survey—which had its first release since before the holidays—saw the largest increase in bullish sentiment since June 2016. That meant for our sentiment composite (which is an average of how many standard deviations from the historical norm the NAAIM index and bull-bear spread for the AAII and Investors Intelligence surveys are), this week saw a continued recovery in bullish sentiment. Click here to view Bespoke’s premium membership options.