Fear as a contrarian indicator
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!
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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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...