Newsletter bulls

The latest release of the Investor's Intelligence survey showed a Bull Ratio (Bulls / (Bulls + Bears)) of 78.5%, the highest since mid-January. Selling stocks just because this particular survey shows high optimism has not been a great trade-off, though.

The gif below cycles through a scatterplot of forward returns in the S&P 500 for the next 1, 3, 6, and 12 months depending on the value of the Bull Ratio. If it was a consistent contrary indicator, then the blue dots and the line should slope from the upper left to the lower right, which it does very modestly.

The R-squared figure gives us a sense of how much the survey predicted forward returns. The higher the R-squared, the more impact the survey (supposedly) had.

We can see from the chart and R-squared that it increased as time went on, with the highest value by far being over the next 12 months. It's still not very strong, but it at least suggests that the survey didn't have all that much impact for shorter-term traders, or really even swing traders.