From the desk of Willie Delwiche.
The Investors Intelligence Bull-Bear Spread was unchanged last week, remaining just beneath the level that in the past has signaled full embrace of equities and the opportunity for sustained stock market strength.
Why It Matters: Excessive optimism can signal elevated risks for equities, but since 2015, virtually all of the net gains for the S&P 500 have come when II bulls have exceeded bears by 18% or more. For the past two weeks the spread has been stuck at 16.9%. The absence of bulls and a sustained re-building in optimism over the past year have been a headwind for stocks. The shift from excessive pessimism to elevated optimism is typically when stocks do their best, but this cycle investors have been slow to embrace rally attempts. With stocks strong out of the gate to start 2023, the lack of optimism is notable. If 2023 is not going to follow the path of 2022, investor attitudes about stocks will need to change.
In this week’s Sentiment Report we take a closer look at why investors have been slow to embrace stocks and why it’s important that they do so, sooner rather than later.
