Key Takeaway: At last week’s CMT Symposium, the lack of bulls and high number of bears on the AAII survey was probably the most oft-cited single statistic by the symposium speakers. This week’s data confirms that pessimism. II bears reached their third highest level in the past decade and put/call ratios haven’t been as high as they are now since the COVID crash. Beneath the surface, however, there is evidence that investors haven’t actually thrown in the towel. The AAII Asset Allocation survey for April shows that while they said they were bearish last month, individual investors were actually increasing equity exposure. The spike in the put/call ratios meanwhile has more to do with collapsing call volume than surging activity in puts. Bearish sentiment extremes are difficult to identify in real-time, that’s why it’s typically best to go with the crowd until it has reversed.
Sentiment Report Chart of the Week: What They Do > What They Say
The 4-week average of Bulls on the AAII survey (more on this later in the report) is at its lowest level in more than three decades. But while investors report a lack of confidence, their actions tell a different story. Asset allocation data from the AAII shows that investors actively increased equity exposure last month. It’s difficult to reconcile the idea of washed out sentiment with a public that is buying stocks. When there is a divergence between what they say and what they do, I put more weight on action than on talk.
