The Investors Intelligence measure of advisory services sentiment shows Bulls rising to their highest level in over a year. Bears have not (yet) undercut their summer lows and the Bull-Bear spread is still just below its August peak.
Why It Matters: We need bulls to have a bull market. This flies in the face of a desire to only see sentiment from a contrarian perspective. The way I learned it, it pays to go with the crowd until it reverses at an extreme. After the persistent and excessive pessimism of 2022 (which was certainly present in word if not deed), the best prospects for a sustained rally at this juncture is for investors to shift their attitudes and embrace stocks. A failure for investors to turn more optimistic at this juncture could hasten a longer-term positioning re-balance. We have gotten hints of that in recent weeks as ETF flows show investors eschewing US equities in favor of international equities and fixed income ETFs.
In this week’s Sentiment Report we take a closer look at where optimism is showing up, where it remains absent and how investors are feeling as earnings season gets underway.
