By Seeking Delta of http://seekingdelta.wordpress.com
Both the NAAIM (active money managers) and AAII (individual investors) sentiment surveys released this week show a spike in bullish sentiment. The biggest increase in bullish sentiment came in the AAII survey where the bullish reading jumped to 58% from 48% last week. This is the highest level since January 2007.
This week, active managers have, on average, a 72% allocation to equities. This is up from 70% last week. The median allocation jumped to 97% while the top quartile of active managers have an allocation of 100% or greater to equities with the bottom quartile at a 65% or less equity exposure. The eight week moving average continued its uptrend, now at 67%.
The NAAIM number measures current equity exposure (0% would be all cash, 100% fully invested). Additional detail can be found here.
After last week’s decrease in bullish sentiment, this week we see a large jump in the individual survey conducted by AAII. Individual investors increased their bullish sentiment for the next six months from 48% last week to 58% this week. Bearish sentiment also declined slightly to 28.5% from last week’s reading of 29.8% which means the large increase in bullish sentiment came almost entirely from a decrease in neutral sentiment. Individual investors are becoming more polarized with neutral sentiment at 14%, the lowest level in May of 2009. The Bull-Bear spread reached 29% and the eight week moving average increased to 49%, which is the highest level since January 2005.
Individual investor sentiment is well into the “extreme” territory (measured as one standard deviation above average) and is near the 60% level which would be a two standard deviation eveny with the NAAIM survey also approaching the “extreme” category.
For analysis of the subsequent equity returns based on sentiment surveys please see the flowing links. AAII research here and NAAIM research here.
