The bulls are back! All it took was a stock market rally for the bulls to realize that the world wasn’t ending. Of course, as they were pessimistic at the bottom they’re now optimistic after a huge short-term move in stocks. According to the AAII bullish sentiment declined a bit this week, but remains firmly in excessively bullish territory:
“Bullish sentiment, expectations that stock prices will rise, fell 5.9 percentage points to 45.0% in the latest AAII Sentiment Survey. This is the third consecutive week that bullish sentiment has been above 40%. The last time we saw such a streak was April 15, 2010. The historical average for bullish sentiment is 39%.”
The Investors Intelligence bullish survey also jumped this week from 36.7% to 41.4%. This is a more neutral reading than the excessively bullish posture expressed in the AAII survey, however, this does represent a sizable near-term move from very bearish sentiment just a few weeks ago:
Charles Rotblut at AAII believes investor psychology remains fragile. He describes the current sentiment as a “cautious optimism”:
“Individual investors continue to remain hopeful that a short-term bottom in the markets has been formed. It is a cautious optimism, however, as any pullback in stocks or weaker-than-forecast economic data could easily fray individual investor’s nerves.”
Source: AAII, II
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.