AAII Bearishness Historically Preceded Stronger S&P 500 Returns
Rocky White's analysis found stronger six-month returns when bearish survey responses outnumbered bullish ones, including when the index was near its high.
Key takeaways
- When bears outnumbered bulls by at least 10 points, the SPX averaged a 7.86% six-month return.
- That sentiment level was followed by positive six-month returns 78% of the time.
- Near record highs, the average six-month return was 6.47%, with 88% of returns positive.
The S&P 500 has historically delivered stronger returns after a particularly bearish reading in the American Association of Individual Investors survey, according to Schaeffer’s analyst Rocky White. His review found the pattern held even when the index was close to its record high.
White examined weekly survey results dating back to 1990. When the four-week average showed bears outnumbering bulls by at least 10 percentage points, the SPX averaged a 7.86% return over the following six months. Returns were positive 78% of the time, the strongest results among the sentiment groups he compared.
The pattern also appeared when the index was near its high. Among 299 readings with that level of bearishness, White found that instances when the SPX was within 5% of its all-time high had an average six-month return of 6.47%. Returns were positive 88% of the time.
The latest survey discussed in White’s analysis showed the four-week average below minus 10%, while the SPX had closed within 2% of its all-time high. White said the near-high group’s average return was lower than when the index was further from its peak, but its positive-return rate was higher and volatility tended to be lower.
These are historical results, not a guarantee of future performance. White also found that the most optimistic survey readings were associated with the index’s lowest forward returns over some periods, including six months and one year.
This article was produced with the help of AI technology. Source: Yahoo Finance
