Fear as a contrarian indicator

Anthony Doyle

Firetrail Investments

Each week, the American Association of Individual Investors (AAII) asks its members a simple question: Do they feel the direction of the stock market over the next six months will be up (bullish), no change (neutral) or down (bearish)?

This question is known as the AAII Sentiment Survey. Since the AAII started polling its members in 1987, the survey has provided insight into the moods of individual investors.

Looking at the latest results, it is clear that fear is the prevalent emotion in the market. It's hard to find any bulls right now!

AAII US Investor Sentiment Bearish Readings
AAII US Investor Sentiment Bearish Readings

The AAII note that the Sentiment Survey is a contrarian indicator. Above-average returns have often followed unusually bearish readings, while below-average returns have often occurred after unusually high levels of optimism.

Over the next 6 months are you bullish, bearish, or neutral on the prospects for global equity markets? Comment below!

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This communication was prepared by Firetrail Investments Pty Limited (ABN 98 622 377 913, AFSL 516821) (Firetrail). It is for general information only. It has been prepared without taking account of any person’s objectives, financial situation or needs. It is not intended as a securities recommendation or statement of opinion intended to influence a person or persons in making a decision in relation to investment. Any persons relying on this information should obtain professional advice before doing so.

Anthony Doyle
Head of Investment Strategy - Firetrail S3 Global Opportunities Fund
Firetrail Investments

Anthony Doyle is Head of Investment Strategy for the Firetrail S3 Global Opportunities Fund. His primary responsibilities include fundamental idea generation, portfolio analysis, and economic insights including currency and macroeconomic risk...

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