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Individual Investor Sentiment is Elevated

Insights | Individual Investor Sentiment is Elevated

Author: David Templeton, CFA, Principal and Portfolio Manager, HORAN

The  American Association of Individual Investors reported a jump in bullish sentiment to 56.9%. This is the highest bullishness level since the reading reached 59.7% for the weekly reporting period ending January 4, 2018. As the below chart shows, higher levels of bullishness have a tendency to occur near market tops; however, the pullbacks can be brief or short lived. Also, bullish sentiment can get to higher levels as happened in 2003 when bullishness was reported in the low 70 percent level.

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For comparison purposes, the below chart shows bullishness levels during several prior market bubble periods. Readers should note though, sentiment alone is not necessarily a good timing tool; however, it can provide important insight into investor psychology.

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