Investors have felt consistently bullish about stocks this year, a rare backdrop that could foreshadow poor returns in 2025, according to Jason Goepfert, a senior research analyst at SentimenTrader.
"As a sign of just how optimistic folks have been this year, one of the most popular surveys of individual investor sentiment has spent only two brief weeks with (barely) more bears than bulls," Goepfert wrote in a Monday client note.
"This will go down as a year with among the most bullish sentiment since the 1987 inception of the AAII survey," Goepfert wrote, adding that investors were only more consistently optimistic in 1995 and 1999.
Of note, Goepfert also found the S&P 500 tended to stumble in a new year after bullishness that lasted at least 45 weeks out of a year.
"The one year that didn't show weakness ended up giving all its gains back, and then some - it was the peak of the internet bubble," he wrote.
Similar weakness was evident the following year when looking at sentiment surveys from Investor's Intelligence, which showed "a negative relationship between the number of weeks in a year with twice as many bulls as bears," according to Goepfert.
"There is little dispute that stocks are currently at some of the highest valuations in history by nearly any metric," Goepfert said, adding that history also shows "a surprisingly large amount of money is not only willing to ignore, but also chase, these trends."