Sentiment has once again shifted rapidly in recent weeks as the bi-polar market continues its confused, drunken walk. The Investors Intelligence Survey showed a bullish reading of 52% before the correction started, but investors have dramatically tempered their expectations as the latest reading shows just 35.6% bulls. At the peak the bears were just 19% vs 27.8% bears today. This bull bear ratio of 1.28 is relatively neutral in historical terms.
The AAII survey is also showing relatively neutral readings. The most recent data showed a marginal decline versus last week. Charles Rotblut of the AAII provides some details:
“Neutral sentiment hit a six-week high in the latest AAII Sentiment Survey. The percentage of individual investors expecting the markets to remain flat over the next six months reached 28.9%.
At the same time the spread between the bulls and the bears narrowed to less than one percentage point. Bullish sentiment registered 35.8% and bearish sentiment registered 35.2%. This is the smallest spread between those expecting stocks to rise (bulls) and those expecting stocks to fall (bears) since December 24.”
All in all sentiment has shifted back to a neutral reading as the markets stabilize. This high volatility in sentiment is a clear sign of utter confusion on the part of market participants and creates a landscape that is ripe for dramatic moves in either direction.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.