Investing.com -- Despite record-high stock prices, investor sentiment has taken a decidedly bearish turn in recent weeks, a development that Yardeni Research views as a contrarian bullish signal.
"Sentiment Remains Remarkably Bearish, Which Is Bullish," reads the latest note from the firm.
“We noted this development a week ago and concluded that it might be a bullish signal from a contrarian perspective,” they added. "We aren't sure why there are more bears and fewer bulls recently," the firm continues, highlighting the divergence between market performance and investor sentiment.
This bearishness comes despite positive economic indicators. "The current Q4-2024 earnings reporting season is starting with lots of better-than-expected results, led by the big banks," the note observes.
Yardeni also says that the news on AI capital spending remains bullish for semiconductor stocks. Moreover, key economic indicators like the Citibank Economic Surprise Index and the Index of Coincident Economic Indicators are showing strength.
Yardeni Research points to several measures of bearish sentiment, including the Investors Intelligence sentiment survey and the AAII sentiment survey.
The AAII survey, for instance, is said to show bullish sentiment at its lowest level since November 2023. "Bearish sentiment climbed 3.2ppts to 40.6%, an unusually high reading above its historical average," the firm states.
While the reasons for this bearish turn are unclear, Yardeni Research believes it could present an opportunity for investors.