Apr

20

I occasionally look at the AAII (American Association of Individual Investors) weekly sentiment survey. I've not found any reliable use for it, except that when the AAII survey is uber-bearish, it's anecdotally a good time to start gently nibbling at stocks (when valuations are reasonable).

This morning's survey data may be apocryphal, but it's also interesting:

Bulls 2.2%; Bears 3.8%; Neutral 5%

The bull, bear, and neutral numbers are remarkably similar. So I looked at the history of neutral opinions:

From 2002 to 2007, the "average" neutral opinion was 25%. (Defined as the mean of the entire period for neutral.) From 2007 to 2009, the "average" neutral opinion was about 20.But from 2010 to the present, the "average" neutral opinion is over 28% and continues to climb higher!

There are some amusing/surprising (and perhaps interesting) conclusions:

1) The financial crisis marked a "bear market low" for neutral opinion.

2) Since then, we have been in a "bull market" for neutral opinion. Or more succinctly, the number of people who have "no clue" continues to rise sharply!

As everyone knows, I never have any idea what's going to happen. But perhaps I need to reconsider my position since it appears to be a "crowded trade…"


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  1. Craig on April 24, 2012 6:31 pm

    Allocation is more interesting. Above 70% stocks has been overbullishness and bear markets normally bottom around 40%. The overbullishness is probably closer to 65% in this new era. We got over 68% stocks in 2007 but the January 2011 high was 63.54%. Cash and bonds vs stocks can be interesting. If you put some sort of short-term growth rate on them, you can see when we reach extremes like in early 2011 when there was little interest in risk. Right now, stocks are just above 60% and the growth rates have come off for bonds+cash but just crossing stocks in a neutral area.

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