Investment Advisor Sentiment

For over 40 years, Investors Intelligence has reported market sentiment surveys. They survey and measure the percentage of bullish investment advisors, bearish investment advisors and percentage of advisors expecting a correction.

As recently as July 25th, they reported that 50% of advisors were bearish. This is one of the highest readings in the past 40 years. The only other time bearish sentiment reached these levels among investment advisors was in late 1994 to early 1995.

Now, I realize that many of you weren’t even trading back then, probably due to the fact that you were too busy drinking beer and chasing tail around campus. Just realize that the market ended up rallying over 37% in the following 12 month period, when it broke out in February of 1995.

To get a perspective on where we stand now, the 1998 “Asian contagion” showed bearish sentiment readings of 46% – 47%, and the tech wreck bottom of 2002 didn’t even show bearish sentiment that high among advisors.

With short interest at these levels, this advisor sentiment reading is also something to put in that “Costanza file” for later use.

These sentiment indicators are contrarian measurements, and should not be relied upon for timing trades. But still, something to remind you of the environment we are in as we approach the end of Q3.