Poll Results: Sentiment – where have the bulls disappeared?

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Sentiment indicators from the AAII (individual investors) and Investors Intelligence (newsletter writers) indicate that stock market sentiment is at historically high levels, and has been for a while. However, whenever I discuss stock markets with people – ranging from private investors to institutions to journalists – most of them seem to be more concerned about a looming correction in the near term than being bullish. Maybe it is just a question of communicating with different people from those participating in the surveys, but anecdotally I do not observe particularly bullish sentiment.

In order to cast light on this issue, I proceeded to run my own survey to try to get a feel for how the readers of Investment Postcards and The Big Picture (Barry Ritholtz’s blog) see matters. 4,004 people participated in the poll, resulting in the numbers in the table below.

The comparative numbers show the following:

  • The Investment Postcards Survey had fewer bulls and significantly more bears than the AAII and Investors Intelligence Surveys. The number of neutral votes were much the same.
  • The Investment Postcards Survey actually had more bears than bulls, resulting in a bull-bear spread completely opposite from that of the other surveys.

Source: AAII; Investors Intelligence; Investment Postcards.

The results of the Investment Postcards Survey support my anecdotal observation that most people I talk to seem to be fearing a correction/pullback rather than be bullish. I have absolutely no idea why the results of my survey are so different from the others as all the surveys polled people with some interest in the stock markets and mostly from the U.S. The questions were also the same and the six-month investment horizon the same as that of the AAII. (I do not know the time period used by Investors Intelligence.)

The number of participants in the AAII and Investors Intelligence Surveys were not disclosed, but I assume they are representative samples. Although 4,004 participants are not a particularly large number, I am of the opinion that it is large enough to show a pattern. The Investment Postcards Survey closed four days (including two trading days) after the others, but this should have increased the bulls/reduced the bears as market sentiment was quite upbeat over those days.

What now? I am tempted to run my survey on a continuous basis for the simple reason that the results seem to support my intuitive feel to a much greater extent than that of the AAII and Investors Intelligence Surveys. But this is where I need your help on the interpretation of the results. Am I missing something somewhere? Where is the flaw in the logic? Is sentiment in reality not as overbullish as the other surveys show? Please post your remarks in the comments section of the post so that we can get the debate going.

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14 comments to Poll Results: Sentiment – where have the bulls disappeared?

  • […] post? If so, click here to subscribe to updates to Investment Postcards from Cape Town by e-mail. Poll Results: Sentiment – where have the bulls disappeared? was first posted on January 17, 2011 at 11:00 am.©2011 “Investment Postcards from Cape […]

  • john beirne

    money flows are bearish how can sentiment be bullish

  • Eric Williams


    I like to believe that your readers have a higher level of interest and understanding of the markets relative to the CNBC/Jim Cramer crowd. Therefore, our sentiments should be less counterintuitive. You should take credit in these results as you’ve been educating us on the technical signals pointing to market in need of a correction.

  • It may be because the type of investors who read your blog aren’t representative of the man on the street. While I have no idea what the demographics and average level of understanding of finance/investments was like for the other polls I can only assume that the average reader of your blog has a fairly strong understanding of investment basics and is reading your blog because they are always looking for for info because they are consistently questioning their investment decisions and that of the overall market. This makes them more bearish. The better you understand something the more the risks become apparent. Just a thought.

  • I agree with you Prieur, I think that people are looking at the AAII as a contrarian indicator…

    Whilst I would have agreed that the likely scenario was a correction a few weeks ago – I think the market is sending signals that precisely for the phenomena you have mentioned it will work off over-bullishness by a lateral consolidation, or will steam roller ahead anyway.

    Too many people are waiting to buy.

  • Charles H Hendry

    The selection process for this survey differed significantly from others. While I’d like to think that this indicated superior something or other since I’m a frequent reader, I can’t back if up with any great achievements on my part. In any event, I feel as though this group is ‘my’ group.

  • Anecdotal take on my side also suggests most people are not bullish on the market, even after a two year bull market. Many still aren’t even invested in stocks. So any bullish polls should be ignored because they aren’t a representative sample.

    With that said, however, the market should get a corrective move this week.

  • king

    I agreed with your poll. My own anecdotal feeling is that people are more bearish than bullish. I watch CNBC daily during market hours and CNBC mentioned corrections at least ten times a day. This has been my observation since end of November 2010. And the market is on the way up without any pull back at all.
    My conclusion is the AAII survey is extremely inaccurate and if you used that as a sentiment measure, beware you might be barking up the wrong tree.

  • gmcg

    I am always grateful for the insights provided by Postcards as I strongly question the US government/Fed involvement in the Markets. Other commentators suggest to enjoy the cruise but jump off before the ship sinks. Hate to miss a good time but not sure I even want to get on the ship even with a life preserver in hand at all times.

  • Marcel

    You regularly write about Robert Shillers CAPE while other media pay virtually no attention to this important measure of valuation. How could anyone be bullish on the long term at current CAPE-levels?

  • @Marcel: More on earnings and valuation levels in a few days’ time. The current earnings season is of particular interest re revenue and profit lines, and specifically which way very wide margins are going.

  • From a recent Wall St. Journal on the AAII survey: “Just 200 to 300 investors respond each week, less than 0.2% of the association’s 150,000 dues-paying members, according to the Chicago-based group, which doesn’t publish the sample size. Among them are a large number of retirees…”
    Full article here: http://online.wsj.com/article/SB10001424052748704447604576007920154277428.html?KEYWORDS=aaii+survey

  • tony E

    In my humble view the confusion is probably a manifestation of all of us climbing that proverbial “wall of worry”.That does not mean to say we won’t see a correction and the deeper the correction the greater the buying opportunity especially if my wall theory is correct. Only time will tell but I do think it is better to have skin in the game (preferably from way back) than not.

  • Doug

    I voted bearish in your poll as a best guess – reason – after an essential 6.5 month advance and some international signs (inflation, interest rates) of a cyclical topping among the growing countries and based on insecurity in several areas: US – congress gutting the stimulus while adding to the deficit; Europe – austerity kicks in; Frontier/emerging – food inflation and instability and the possibility these roll into regime change in the Middle East (those oily guys). Also, in the US, all equity groups are correlated in reaching new local peaks now – this happy state of sentiment appears vulnerable as all are sharing in it.

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