Visualizing 30 Years of Investor Sentiment

Investor sentiment garners attention because it provides a glimpse at how investors might behave. In this way, sentiment would influence their investment behavior, and in turn the wider stock market. To be sure, the link between sentiment and the stock market is not linear. In fact, many consider extreme sentiment readings as a contrarian indicator. If sentiment swings sharply in one direction, some investors may consider this a signal to do the reverse.

This graphic shows 30 years of investor sentiment, based on data from the American Association of Individual Investors (AAII).

How is Investor Sentiment Measured?

The AAII survey shows bullish sentiment, indicated by the percentage of investors who think the stock market will be higher in six months. We charted the eight-week moving average for bullish sentiment to smooth out fluctuations and show broader trends.