AAII Investor Sentiment Survey: Bull-bear spread (6-week moving average)
Source: American Association of Individual Investors (AAII), as of December 7, 2022. The AAII Investor Sentiment Survey has polled individual investors every week since 1987, on their belief about the market’s direction in the following six months.
- The past two months’ market rally proved to be short-lived as Fed Chair Powell quickly extinguished it, reminding investors in his November 30 speech that policymakers remain committed to lowering inflation, even if it means keeping rates higher for longer.
- Since the speech, stocks have fallen in five of the six trading days while recession concerns have mounted.1 Yet December’s activity is perhaps more closely aligned with prevailing investor sentiment than the rally in October and November was.
- According to the AAII Investor Sentiment Survey, market bears have outnumbered bulls for a record 36 consecutive weeks and have done so in 53 of the past 55 weeks. As the chart shows, recent bearish sentiment has run longer and been deeper than any time since the global financial crisis.1
- Many view investor sentiment as a contrarian indicator, meaning above-average returns have often followed periods when sentiment turns bearish. Indeed, it could prove to be the case again.
- Yet, with inflation likely to continue challenging markets into 2023, while the Fed looks to cool the jobs market, investors may be wise to remain prepared for further market choppiness. Against this backdrop, alternative sources of income and total return could remain at a premium.