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< BACK TO ALL REPORTS

The Longest Stretch of Optimism in History is Over

Dean Christians
2021-09-22

The percentage of bullish newsletter writers in the Investors Intelligence sentiment survey just ended the longest stretch of consecutive weeks above 50% in history. According to my calculation, the count reached 69 straight weeks.

Let's conduct a study to isolate similar instances in history and assess the forward return outlook for the S&P 500 Index. I will lower the threshold to 20 weeks above 50% to capture more signals.

HISTORICAL CHART

Please note I moved the investor's intelligence data forward by 1-week so that the most recent survey reflects the distribution week.

HOW THE SIGNALS PERFORMED

Results look weak in the 1-week timeframe and slightly better on an intermediate-term basis. The 6-12 months results underperform the historical averages.

The lackluster results would suggest that investors might need to temper their expectations concerning future returns. Valuations would undoubtedly support the case.

Interestingly, all but one instance occurred in the last two decades. We wonder if easy monetary policy is driving the long stretches of optimism.


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