As you can see, US corporate CEO’s have historically been very accurate in being pessimistic (predicting a recession) at just the right time in the past. While not quite below the line, it looks like we are just a whisker away based upon the most recent data.

Optimism among individual investors about the short-term direction of the stock market fell to its lowest level in three and a half years. The latest AAII Sentiment Survey also shows a jump in pessimism and lower neutral sentiment.

Bullish sentiment, expectations that stock prices will rise over the next six months, declined by 1.1 percentage points to 20.3%. Optimism was last lower on May 25, 2016 (17.8%). Bullish sentiment is below its historical average of 38.0% for the 33rd time this year and the 21st time in 22 weeks.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, pulled back by 3.5 percentage points to 35.7%. Even with the decrease, neutral sentiment is above its historical average of 31.5% for the 20th time in 21 weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, rose 4.5 percentage points to 44.0%. Pessimism was last higher on August 14, 2019 (44.8%). Bearish sentiment is above its historical average of 30.5% for the 10th time in 12 weeks.

Bullish sentiment is at an unusually low level for a second consecutive week. Pessimism is at an unusually high level for the first time in six weeks. Historically, such readings have been followed by higher-than-median six- and 12-month S&P 500 index returns. The link is stronger with unusually low optimism than it is with unusually high pessimism.

 For bulls this is great news as we know individual investors are usually wrong, so sentiment readings at the lowest levels since 2016 is very bullish. Historically, such readings have been followed by higher-than-median six- and 12-month S&P 500 index returns. The link is stronger with unusually low optimism than it is with unusually high pessimism.