Prior Chart      
Chart In Focus

Investors Intelligence Data Nearing Parity

Chart In Focus
February 25, 2022

In the latest survey from Investor Intelligence, bulls have fallen to 32.2%, and bears are at 31.0%.  That is the lowest bull-bear spread since the Covid Crash in March 2020. 

This is pretty significant, because the average bull-bear spread since 2006 is +24.  That is another way of saying that the investment advisors and newsletter writers surveyed by Investors Intelligence are bullish most of the time.  And that is appropriate, since the stock market goes up most of the time.  Or at least that has been true in the past few years. 

Looking deeper into the data, there have been some changes over time.  It used to be that having bears exceed bulls was a frequent occurrence many years ago.  But over the past few decades, the survey population has been tending toward less bearishness.  Here are the data on the bears alone since 1990:

Investors Intelligence bears

Because these data are plotted on an inverted scale (to better correlate to price action), the upward trend actually means a downward trend in bearishness.  That is a pretty fascinating development; the Fed’s actions to prop up the economy and the financial markets since 2009 have resulted over time in people thinking that there is less risk in the stock market.  Perhaps one day this long trend will adjust itself.

It is perhaps not a surprise that the recent equalization of bulls and bears has happened as a result of prices falling in a meaningful way.  This is an important point, that prices and sentiment are really related more than most analysts appreciate.  Rising prices get people more bullish.  Falling ones get people convinced that more trouble is ahead.  Even though this is generally the opposite of how prices actually behave, it is how the human brain behaves. 

To make the point that prices and sentiment really are the same thing, years ago I sought to make that comparison directly.  One problem is that stock prices trend upward over time, whereas the sentiment data are naturally bounded.  I solved this problem mathematically by “detrending” the price data.  In this case, what I did was to plot the SP500 data expressed as a percentage deviation away from its 200-day moving average.  That way I could plot it better versus the sentiment data.  Here is that comparison:

Investors Intelligence bull bear spread and SP500 detrended

The scaling in this chart is adjusted to get the tightest fit possible of the two plots, and doing so reveals the significant bias to the bullish side of the survey respondents.  The zero lines for the two plots are not in the same place on the chart.  All of these adjustments help us to see the point that changes in price levels help result in changes in sentiment, although not necessarily in a linear fashion, and not exactly uniformly over time. 

The change in sentiment thus far in early 2022 is a natural outcome from the change in the price level.  So be careful what conclusions you draw from hearing that bulls versus bears has done something interesting.  It could just be a reflection of the price action.

Tom McClellan
Editor, The McClellan Market Report

Related Charts
Jul 22, 2021
Enable Images to see this Chart
Big Weekly Drop In Investors Intelligence Data
Aug 02, 2018
Enable Images to see this Chart
Investors Intelligence Bull-Bear Spread
Nov 06, 2014
Enable Images to see this Chart
More from Investors Intelligence Data