56.9% of respondents were bullish, a higher level has only occurred 4.7% of the time since 1990 (red line).
But is there any predictive value in these readings?
My scatterplot below shows the Bullish % & the subsequent 3-month returns of the S&P500 since Nov 1990 (source: AAII & Bloomberg).
Over the entire period, positive return periods outnumbered negative return periods 2.3 : 1, and the win/loss was similar at +5.9% and -6% respectively.
Interestingly, when few people were bullish (below 25%, 6.4% of the time), the + return periods outnumbered – return periods by a far greater than average 5.8 : 1, and the win / loss rose to 1.37 (8.1% / 5.9%).
But when people are as bullish as now, + return periods outnumbered – return periods by only 1.4 : 1, with a win / loss of 1.07 (4.5% / 4.2%).
So lower odds of “winning” & a smaller return (if you owned the S&P500).
Russia is amassing troops in Ukraine, China is tormenting Taiwan, Israel cyber attacked Iran & earnings season is about to begin when all last year’s “pull forwarded growth” is in the base.
Watch your risk!