Individual investors continued to show less enthusiasm for equities this week as bullish sentiment dropped for the third week in a row. According to the American Association of Individual Investors (AAII), bullish sentiment dropped from 38.4% down to 35.5%. Since hitting a high of 52.3% in January, bullish sentiment has now dropped by 32.2%. With readings like this, it is hard to argue that investors are overly optimistic.
While individual investor sentiment is often considered to be a contrary indicator for equities, over the last two years declines in bullish sentiment have preceded drops in the equity market.(click to enlarge)