U.S. stocks are extending an eight-week rally in the year’s final week and according to the latest American Association of Individual Investors (AAII) Sentiment Survey, optimism among individual investors about the short-term outlook for the U.S. stock market rose to its highest level in over two and a half years.
American Association of Individual Investors (AAII) reported that bullish sentiment, or expectations that stock prices will rise over the next six months, increased by 1.6 percentage points to 52.9%. For the third consecutive week, optimism remains “remarkably high” and it is also important to say that bullish sentiment has persisted above its historical average of 37.5% for eight straight weeks.
See Related: Dogecoin (DOGE) And Shiba Inu (SHIB) Technical Analysis For February 2023
American Association Of Individual Investors Report
On the other side, the American Association of Individual Investors (AAII) also reported that pessimism is “unusually low” and bearish sentiment remains below its historical average of 31.0% for the eight consecutive weeks. U.S. stock indexes notched their longest weekly winning streaks in years and the positive information is that the latest economic data indicated inflation is easing down closer to the Fed’s average annual 2% target. Peter Cardillo, the chief market economist at Spartan Capital Securities in New York, said:
“We had a good inflation number on Friday and the momentum stays towards the upside. If inflation continues to move down in January and February, there’s a good chance that the Fed may cut (rates) earlier than anticipated.”
Caution For Individual Investors
However, Cameron Dawson, chief investment officer at NewEdge Wealth, is flagging the most recent AAII sentiment survey, among other measures of market sentiment. Dawson emphasizes the significance of regularly assessing the current market sentiment, even though she acknowledges that these readings do not serve as precise timing indicators.
Lori Calvasina, leading U.S. equity strategist at RBC Capital Markets in New York, highlighted increased risks of a pullback as the S&P 500 nears a record high towards the end of the year. JPMorgan Asset Management advocates caution among investors due to potential recession risks. At the same time, Société Générale analysts predict a volatile 2024 for U.S. stocks, foreseeing fluctuations between nearing their recent highs, experiencing a decline, and subsequently rebounding.
