The bullish sentiment of the U.S. stock market didn’t just improve as of late — it exploded higher, according to the latest American Association of Individual Investors Sentiment Survey.
But a strategist at Jefferies thinks the survey isn’t a “golden indicator” of stock-market upside, and argues it also hasn’t always translated to solid performance. “What it does do, in either direction, is providing a precise picture of what has already happened [in the stock market],” Greenebaum said in a Saturday note.
Irrespective of if the U.S. economy is headed for a recession, the Jefferies strategist thinks the stock market’s 2023 rally is mostly based on corporate fundamentals that already have weakened. “Not only has the SPX revision ratio slunk back below 1, which is indicative of more negative revisions than positive, but it’s already back to the 33rd percentile looking back as far as we have data… from the 68th as recently as May,” Greenebaum wrote.