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Neutral Sentiment Readings Above 50% Followed By Gains

Since the AAII Sentiment Survey started in 1987, a neutral sentiment reading above 50% has only been recorded 28 times. This week’s reading of 52.9% is the highest since April 12, 1990.

During the 26 occurrences prior to December 30, 2015, the S&P 500 rose 24 times over the following 26-week period. The large-cap index rose 25 times during following 52-week periods. The average gains were 8.4% and 20.5%, respectively.

The table below shows all 26 occurrences and how the S&P 500 fared following each of them. A complete history of the survey’s results can be downloaded from the AAII Sentiment Survey page. An analysis of the market’s performance following unusually high and low sentiment readings was published in the June 2014 AAII Journal.

Pay attention to the dates, as 22 of the 28 readings were registered over the approximate two-year period of December 1987 through October 1989. Also understand that the link between sentiment and returns is not causal. There is no guarantee that stocks will continue to outperform following extraordinarily high levels of neutral sentiment in the future.

The 26 Neutral Sentiment Readings Above 50%

Date Neutral Sentiment 26-Week S&P 500 Return 52-Week S&P 500 Return
12-24-87 52.0% 7.1% 10.3%
2-5-88 53.0% 14.5% 18.3%
2-26-88 51.0% 15.9% 9.4%
4-15-88 53.0% 8.0% 16.0%
4-22-88 57.0% 8.8% 19.0%
5-13-88 56.0% 9.0% 22.2%
5-20-88 52.0% 8.6% 27.0%
5-27-88 52.0% 5.3% 26.9%
6-3-88 62.0% 7.4% 22.2%
7-22-88 58.0% 2.0% 27.5%
7-29-88 54.0% -12.9% 25.8%
8-19-88 53.0% 6.1% 33.0%
9-9-88 52.0% 5.4% 30.7%
9-23-88 53.0% 14.0% 28.7%
10-21-88 51.0% -1.1% 22.4%
11-11-88 56.0% 4.3% 26.6%
12-16-88 54.0% 8.0% 26.7%
12-30-88 54.0% 16.3% 27.3%
1-6-89 51.0% 9.1% 25.5%
3-10-89 52.0% 9.8% 15.4%
4-21-89 51.0% 15.8% 8.2%
10-13-89 52.0% 19.1% -10.1%
4-12-90 56.0% 17.1% 10.5%
7-19-91 51.0% 12.1% 8.2%
8-4-94 52.0% 3.2% 22.3%
2-6-03 51.4% 4.7% 33.5%
12-30-15 51.3% N/A N/A
5-25-16 52.9% N/A N/A
 

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