Based on sentiment readings it’s no surprise that the market has bounced a bit. Both the Investor’s Intelligence survey and the AAII poll are nearing excessively bearish readings. The Investor’s Intelligence poll of bullish investors declined to 37% from 41.1% last week.
The AAII poll showed a similar decline in bulls:
“Bullish sentiment fell 3.7 percentage points to 20.9% in the latest AAII Sentiment Survey. The proportion of individual investors who expect stocks to rise over the next six months is at its lowest level since March 5, 2009. The historical average is 39%.”
This was the lowest reading since the March 9th 2009 bottom in stocks. Charles Rotblut at AAII elaborated on the results:
“Last week’s poor performance by stocks clearly has individual investors worried that a market bottom has not been set. In addition to the downward pressure on stock prices, individual investors are also worried about the economy, the size of the federal deficit, and the longer-term threat of higher inflation and interest rates.
The last time bearish sentiment was higher was March 5, 2009. This coincided with the bottom of the last bear market. However, bearish sentiment hit 57.1% on November 20, 2008 and stocks continued to fall after that date.”
Sources: 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.
