STOCK MARKET OPTIMISM CONTINUES TO SURGE

Sentiment data is surging this week. The Investor’s Intelligence poll is showing a new high in bullishness and a new low in bearishness. 18.9% of advisers tracked in the polling are bearish on stocks. Bullishness has now surged to 51.1%. Bullish sentiment is surging versus last week’s reading of 48.9%.

The latest Merrill Lynch Fund Manager Survey is showing similar optimism. 71% of the respondents believe that earnings will jump 10% or more over the next 12 months. This is up dramatically from 53% in March. The survey also showed that 52% of managers are now overweight equities versus just 33% in February. Michael Hartnett, Chief Equity Strategist at B of A Merrill Lynch says the Goldilocks scenario is priced into stocks:

“April’s survey shows a growing number of investors envisaging a Goldilocks scenario of above trend growth and benign inflation. The findings are consistent with the view that the US consumer, far from remaining in intensive care, is on the path back to good health.”

Today’s AAII poll showed the same trend in wild bullishness. Bullish sentiment surged to 48.5%. This is the highest bullish sentiment since the beginning of the year. Charles Rotblut at AAII notes that the current skew between bulls and bears is consistent with periods prior to a pull-back, but not representing “irrational exuberance”:

“The spread between bullish and bearish sentiment is at +19. This is a level that has correlated with the past few market pullbacks, though is not a level that suggests irrational exuberance.”