AAII Sentiment -- another way to look at AAII data

Very little confidence in the equity market has been shaken – yet. 

Consider the surveys from the American Association of Individual Investors (AAII). Sentiment – talk – is lopsided at 60.9% bearish and just 17.7% bullish. 

Portfolio allocations – actions – are an entirely different story, with an above-average 64.5% allocation to equities, nowhere close to the 40% equity allocations that AAII respondents reported at the 1990, 2002, and 2009 market lows. 

Put simply, investors are clearly becoming uncomfortable, but in practice, they continue to defend the hill of extreme valuations, in the apparent belief that whatever risk remains must be short-term in nature. 

“After all,” investors have been trained to repeat, “it always comes back.” 

It’s easy to forget that the speculative (2021) valuations can be followed by S&P 500 returns below T-bills, and even below zero, for more than a decade.

SOURCE OF QUOTE:

Now Comes the Hard Part - Hussman Funds