Ordinary investors remain miserable, US poll finds

Ordinary investors do not expect the bear market to end any time soon, according to the latest American Association of Individual Investors (AAII) poll.

Just 18 per cent expect US stocks to rise over the next six months, the second consecutive week bullishness has been below 20 per cent. These are “historically low” readings, notes Bespoke Investment, and in the bottom 2 per cent of all weeks going back to the survey’s beginnings in 1987.

Meanwhile, bearishness is at 59.3 per cent — the 11th highest reading in history.

Consequently, the bull-bear spread is at levels unseen since the record reading registered at the height of the global financial crisis in March 2009. March 2009 marked a major market bottom.

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Still, although the AAII poll is regarded as a dumb money indicator, ordinary investors have been rightly pessimistic in 2022, with bullish sentiment at unusually low levels for 18 of the last 22 weeks.

A low reading does not mean a market bottom is near. Miserable sentiment is associated with above-average six- and 12-month returns, suggesting the second half of 2022 may not be as bad as investors fear.