Bulls Bag A 5-Peat: Investing Sentiment Mirrors MJ's Glory Days, AAII Survey Reports

No, this isn’t Michael Jordan’s ’91, ’92, ’93, ’96, ’97, or ’98 Chicago Bulls, we’re talking about the American Association of Individual Investors survey — those Bulls are winning.

What Happened: The latest American Association of Individual Investors (AAII) Sentiment Survey shows a bullish undercurrent sweeping across the market, with optimism levels hitting their peak for 2023.

Each week, the AAII seeks to capture the sentiment of individual investors, asking them where they see the market heading in the next six months. The forward-looking approach of the AAII survey offers an alternative to the retrospective analysis of historical data.

Bulls On The Run: Optimism is soaring, as evidenced by the 46.4% of investors predicting rising stock prices over the next six months in the week ending July 5, 2023. Individual investors' elevated sentiment reflects a 4.5% jump from the previous week and stands above the historical average of 37.5%.

The AAII's optimistic five-week streak is the longest seen since a similar five-week run spanning October to November 2021, a period when bullish sentiment reached a zenith of 48.0%, with the S&P 500 SPY running nearly 8% higher during that period.

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Are The Bears Losing? Conversely, neutral and bearish sentiments saw a dip this week. Neutral sentiment — the expectation of unchanged stock prices over the next six months — dropped 1.5%, settling at 29.1%, the lowest mark for the year.

Bearish sentiment, or the expectation of falling stock prices, fell by 3.0% to 24.5%. The downward trend represents the longest period of subdued pessimism since a five-week stretch in late 2021.

Bull-Bear Spread Scales New Heights: The bull-bear spread, which indicates the degree of optimism by subtracting bearish sentiment from bullish sentiment, widened by 7.4% to reach 21.9%. The spread is currently above its historical average of 6.4% and has maintained this lead for five consecutive weeks.

When asked about their portfolio’s performance in the first half of 2023, 52.5% of AAII members reported better than expected results, while 25.8% said it aligned with their expectations.

A small 13.7% segment reported underperforming portfolios, and 7.4% of investors did not set any expectations at the beginning of the year.

The overall results this week were:

• Bullish: 46.4%, up 4.5%
• Neutral: 29.1%, down 1.5%
• Bearish: 24.5%, down 3%

With historical averages at:

• Bullish: 37.5%
• Neutral: 31.5%
• Bearish: 31.0%

The AAII survey serves as an indicator of shifting market sentiments and trends. Investors’ confidence in market performance over the coming months is palpable, setting the stage for an intriguing second half of 2023.

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