A popular survey of retail investors’ sentiment shows they are more bullish than at any point since March 2022, around the time when the Federal Reserve began its campaign of interest-rate hikes.
However, some market gurus fear this could be a sign that the rally in U.S. stocks that began back in October has finally run out of steam. This is notable for a few reasons. It marks the first time that bullish sentiment has returned to its historical average level in almost 60 weeks, AAII said. When stretched to its extremes, the AAII survey can offer a reliably contrarian signal, a phenomenon that AAII acknowledged on its website.
Others question whether the sentiment data is saying anything useful. Jeff deGraaf of Renaissance Macro Research said in a recent note to clients that “there are points” where the sentiment data matters, “but we’re not at that level.”Indeed, the spread between bearishness and bullishness shows sentiment is still mired in neutral territory.
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Retail investors are getting sucked in, because they don’t know enough. Bull trap