Viewpoint: Market sentiment — when everybody agrees…

Market sentiment — when everybody agrees…

One of the contrarian market indicators that we track at Guardian Capital LP is investor sentiment. When markets get overly optimistic about the future, suddenly “good” results may be “not good enough,” which can lead to an abrupt reversal of upward momentum; on the other end of the spectrum, when investors get too pessimistic, “bad” anticipated outcomes can be “not as bad as feared” and lead to an upswing.

I bring this up because the latest weekly survey of financial advisors conducted by Investors Intelligence¹ showed that 62.3% of respondents were “bullish” on the outlook for markets (see chart below), which is the 31st highest reading (98th percentile) in the more than three decades of the survey’s history, while the 15.1% of advisors in the “bearish” camp was the 45th lowest datapoint (2nd percentile; the residual 22.6% were anticipating a “correction”, which is below average but not an outlier). A lot of optimism and very little pessimism.

The +47.2 percentage point gap between the “bulls” and “bears” is the 16th largest on record and stands nearly two standard deviations above the historical norm. As the chart below indicates, extreme sentiment leanings in favour of the “bulls” such as this, typically are followed by market corrections — notable declines of less than 20% (i.e. not a fundamental bear market; note that as of writing, the S&P 500 Index² is just 1.6% off its January 27, 2026, high) that typically prove short-lived and generally are a healthy, albeit painful, part of a bull market cycle that can help clear froth and reset for the next leg higher.

Investors Intelligence (II) Bull-Bear differential
(“bullish” survey respondents less “bearish”; percentage points)

Source: Guardian Capital, based on data from Investor Intelligence, the WSJ³, and Ned Davis Research to February 3, 2026

In other words, this is a bearish contrarian indicator that brings to mind legendary market technician Bob Farrell’s “Rule #9⁴”: “When all the experts and forecasts agree, something else is going to happen.”

With that said, while it is generally the case that lower readings in this bull-bear differential historically portend better performance than higher readings (see table below), it is interesting that outside of the subsequent week, the extreme positive sentiment readings have seen middle-of-the-road forward returns — perhaps a testament to how short-lived corrections tend to be and enthusiasm tends to remain buoyant through bull markets.

The author’s calculations are based on averages of data from Bloomberg, from March 12, 1989, to February 3, 2026

And, for what it is worth, other market sentiment gauges are not corroborating these extremes, which could suggest optimism may not be as pervasive as this suggests.

For example, the National Association of Active Investment Managers’ (NAAIM) Exposure Index⁵, a survey of active managers’ average exposure to markets, is elevated in the latest week reported (see chart below) at 92.58%, but is not in historic extreme territory (85th percentile; it has been trending lower since mid-December).

National Association of Active Investment Managers’ (NAAIM) Exposure Index
(average exposure to US equity markets; percent)

Source: Guardian Capital, based on data from NAAIM to January 28, 2026

Similarly, the survey of retail investor sentiment by the American Association of Individual Investors⁶ is on the optimistic side of the historical average (see chart below), but not materially so — 44.4% of respondents were “bullish” versus 30.8% “bearish” with the gap at +13.6 percentage points, all of which are well within the realm of “normal” for this typically more pessimistically-leaning survey (bull-bear differential is a 63rd percentile reading, for example).

American Association of Individual Investors (AAII) Bull-Bear differential
(“bullish” survey respondents less “bearish”; percentage points)

Source: Guardian Capital, based on data from the AAII and Bloomberg to January 29, 2026

Finally, the CFTC’s Commitment of Traders’⁷ report shows that equity market speculators using futures & options (typically viewed as a proxy for hedge funds) are not positively positioned — the latest data (released on Friday, see chart below) showed a 99,787 contract net short on the S&P 500, which is half of what it was at the beginning of December but still a half standard deviation below its long-term average and not at all indicative of investors loading up on bullish bets.

Net speculative position on the S&P 500
(thousands of futures & options contracts in noncommercial/speculator accounts; <0 denotes net short position, >0 denotes net long)

Source: Guardian Capital, based on data from the Commodity Futures Trading Commission (CTFC) and Bloomberg to January 27, 2026

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David Onyett-Jeffries
David Onyett-Jeffries is Vice President, Economics & Multi Asset Solutions, at Guardian Capital LP (GCLP). He provides macroeconomic guidance to GCLP and its affiliates. Additionally, he is a portfolio manager of GCLP’s multi-asset portfolios and funds and works closely with GCLP’s Directed Outcomes team.

¹ Investors Intelligence, Advisors’ Sentiment Report, as at February 3, 2026
² The S&P 500 is an index of 500 stocks designed to reflect the risk/return characteristics of the large-cap US equity universe.
³ Wall Street Journal, Markets & Finance, Streetwise, Why, Oh Why, Can’t We Have a Decent Stock Bubble? October 16, 2017, Why, Oh Why, Can’t We Have a Decent Stock Bubble? – WSJ
⁴ Wikipedia, Market Rules to Remember, February 4, 2026, https://en.wikipedia.org/wiki/Market_Rules_to_Remember#cite_note-MW-1
⁵ National Association of Active Investment Managers’, The NAAIM Exposure Index represents the average exposure to US Equity markets reported by our members. February 4, 2026, https://naaim.org/programs/naaim-exposure-index/
⁶ American Association of Individual Investors, The AAII Investor Sentiment Survey, February 4, 2026, https://www.aaii.com/sentimentsurvey
⁷ Commodity Futures Trading Commission, Commitments of Traders, January 27, 2026, https://www.cftc.gov/MarketReports/CommitmentsofTraders/index.htm

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Published: Published: February 12, 2026