by Michael Tarsala, CMT
We are far from a level of market euphoria — one important reason to think that this surprising stock market can rise even higher.
There hasn’t been a multi-year market peak with anywhere near the current level of low market bullishness for nearly two decades now. You would have to go back to the early years of the biggest bull market in history to find a parallel.
Sources: AAII, Yahoo Finance
The chart above is the level of bullishness, as tracked by the AAII. The group began gauging investor sentiment back in 1987. It is one of the longest running investor sentiment surveys and a standard by which stock market sentiment is often measured.
Right now, only 33% of AAII survey participants are bullish on stocks. That is below the 39% long-term average.
More importantly, you would have to go back to the 90s to find market peaks when bullishness was less than 40%. The average bullishness of the past eight multi-year market peaks on the chart above is 47%.
Investor sentiment, of course, is just one of many stock market indicators. You wouldn’t want to hang your hat on single point of data.
But it is a very important one, even for fundamentally-minded long-term investors such as Warren Buffett. As he famously said, you want to be greedy when others are fearful.
In that spirit, there is likely some meaning in today’s lower-than-average market greed. Perhaps this market can continue to climb a wall of worry.
