{"id":10933,"date":"2026-02-12T11:26:22","date_gmt":"2026-02-12T16:26:22","guid":{"rendered":"https:\/\/www.guardiancapital.com/investmentsolutions\/?post_type=insight&p=10933"},"modified":"2026-02-12T11:26:22","modified_gmt":"2026-02-12T16:26:22","slug":"viewpoint-market-sentiment","status":"publish","type":"insight","link":"https:\/\/www.guardiancapital.com/investmentsolutions\/insights\/viewpoint-market-sentiment\/","title":{"rendered":"Viewpoint: Market sentiment — when everybody agrees…"},"content":{"rendered":"

Market sentiment — when everybody agrees…<\/strong><\/p>\n

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 \u201cgood\u201d results may be \u201cnot good enough,\u201d which can lead to an abrupt reversal of upward momentum; on the other end of the spectrum, when investors get too pessimistic, \u201cbad\u201d anticipated outcomes can be \u201cnot as bad as feared\u201d and lead to an upswing.<\/p>\n

I bring this up because the latest weekly survey of financial advisors conducted by Investors Intelligence1<\/sup> showed that 62.3% of respondents were \u201cbullish\u201d 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\u2019s history, while the 15.1% of advisors in the \u201cbearish\u201d camp was the 45th lowest datapoint (2nd percentile; the residual 22.6% were anticipating a \u201ccorrection\u201d, which is below average but not an outlier). A lot of optimism and very little pessimism.<\/p>\n

The +47.2 percentage point gap between the \u201cbulls\u201d and \u201cbears\u201d 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 \u201cbulls\u201d such as this, typically are followed by market corrections \u2014 notable declines of less than 20% (i.e. not a fundamental bear market; note that as of writing, the S&P 500 Index2<\/sup> 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.<\/p>\n

Investors Intelligence (II) Bull-Bear differential<\/strong>
\n(\u201cbullish\u201d survey respondents less \u201cbearish\u201d; percentage points)
\n\"Investors
\nSource: Guardian Capital, based on data from Investor Intelligence, the WSJ3<\/sup>, and Ned Davis Research to February 3, 2026<\/em><\/p>\n

In other words, this is a bearish contrarian indicator that brings to mind legendary market technician Bob Farrell\u2019s \u201cRule #9<\/a>4<\/sup>\u201d: \u201cWhen all the experts and forecasts agree, something else is going to happen.\u201d<\/p>\n

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 \u2014 perhaps a testament to how short-lived corrections tend to be and enthusiasm tends to remain buoyant through bull markets.<\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n
Differential<\/th>\nForward S&P 500 total return<\/th>\n<\/tr>\n<\/thead>\n
II bull-bear differential (ppt)<\/strong><\/td>\n1-week<\/strong><\/td>\n1-month<\/strong><\/td>\n3-month<\/strong><\/td>\n6-months<\/strong><\/td>\n12-months<\/strong><\/td>\n<\/tr>\n
Less than zero<\/td>\n0.6<\/td>\n1.6<\/td>\n3.3<\/td>\n6.5<\/td>\n15.5<\/td>\n<\/tr>\n
0 to 10<\/td>\n0.2<\/td>\n1.3<\/td>\n3.9<\/td>\n7.1<\/td>\n11.9<\/td>\n<\/tr>\n
10 to 15<\/td>\n0.3<\/td>\n1.0<\/td>\n3.4<\/td>\n5.2<\/td>\n10.7<\/td>\n<\/tr>\n
15 to 20<\/td>\n0.0<\/td>\n0.1<\/td>\n1.2<\/td>\n3.1<\/td>\n7.2<\/td>\n<\/tr>\n
20 to 25<\/td>\n0.1<\/td>\n0.5<\/td>\n1.5<\/td>\n3.7<\/td>\n8.5<\/td>\n<\/tr>\n
25 to 35<\/td>\n0.1<\/td>\n0.2<\/td>\n1.9<\/td>\n3.5<\/td>\n6.9<\/td>\n<\/tr>\n
More than 40<\/td>\n0.1<\/td>\n0.8<\/td>\n2.1<\/td>\n5.2<\/td>\n9.5<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

The author\u2019s calculations are based on averages of data from Bloomberg, from March 12, 1989, to February 3, 2026<\/em><\/p>\n

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.<\/p>\n

For example, the National Association of Active Investment Managers\u2019 (NAAIM) Exposure Index<\/a>5<\/sup>, a survey of active managers\u2019 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).<\/p>\n

National Association of Active Investment Managers\u2019 (NAAIM) Exposure Index<\/strong>
\n(average exposure to US equity markets; percent)<\/p>\n

\"NAAIM
\nSource: Guardian Capital, based on data from NAAIM to January 28, 2026<\/em><\/p>\n

Similarly, the survey of retail investor sentiment by the American Association of Individual Investors<\/a>6<\/sup> is on the optimistic side of the historical average (see chart below), but not materially so \u2014 44.4% of respondents were \u201cbullish\u201d versus 30.8% \u201cbearish\u201d with the gap at +13.6 percentage points, all of which are well within the realm of \u201cnormal\u201d for this typically more pessimistically-leaning survey (bull-bear differential is a 63rd percentile reading, for example).<\/p>\n

American Association of Individual Investors (AAII) Bull-Bear differential<\/strong>
\n(\u201cbullish\u201d survey respondents less \u201cbearish\u201d; percentage points)<\/p>\n

\"AAII<\/p>\n

Source: Guardian Capital, based on data from the AAII and Bloomberg to January 29, 2026<\/em><\/p>\n

Finally, the CFTC\u2019s Commitment of Traders<\/a>\u20197<\/sup> report shows that equity market speculators using futures & options (typically viewed as a proxy for hedge funds) are not positively positioned \u2014 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.<\/p>\n

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

\"Net<\/p>\n

Source: Guardian Capital, based on data from the Commodity Futures Trading Commission (CTFC) and Bloomberg to January 27, 2026<\/em><\/p>\n

_____________
\nDavid Onyett-Jeffries<\/strong>
\nDavid 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\u2019s Directed Outcomes team.<\/em><\/p>\n

 <\/p>\n

1<\/sup>\u00a0Investors Intelligence, Advisors’ Sentiment Report, as at February 3, 2026
\n2<\/sup>\u00a0The S&P 500 is an index of 500 stocks designed to reflect the risk\/return characteristics of the large-cap US equity universe.
\n3<\/sup>\u00a0Wall Street Journal, Markets & Finance, Streetwise, Why, Oh Why, Can\u2019t We Have a Decent Stock Bubble?<\/em> October 16, 2017, Why, Oh Why, Can\u2019t We Have a Decent Stock Bubble? – WSJ<\/a>
\n4<\/sup>\u00a0Wikipedia, Market Rules to Remember, February 4, 2026, https:\/\/en.wikipedia.org\/wiki\/Market_Rules_to_Remember#cite_note-MW-1<\/a>
\n5<\/sup> National Association of Active Investment Managers\u2019, 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\/<\/a>
\n6<\/sup> American Association of Individual Investors<\/a>, The AAII Investor Sentiment Survey, February 4, 2026, https:\/\/www.aaii.com\/sentimentsurvey<\/a>
\n7<\/sup> Commodity Futures Trading Commission, Commitments of Traders, January 27, 2026, https:\/\/www.cftc.gov\/MarketReports\/CommitmentsofTraders\/index.htm<\/a><\/p>\n

This commentary is for general informational purposes only and does not constitute investment, financial, legal, accounting, tax advice or a recommendation to buy, sell or hold a security. It shall under no circumstances be considered an offer or solicitation to deal in any product or security mentioned herein. It is only intended for the audience to whom it has been distributed and may not be reproduced or redistributed without the consent of Guardian Capital LP. This information is not intended for distribution into any jurisdiction where such distribution is restricted by law or regulation.<\/strong><\/p>\n

The opinions expressed are as of the date of publication and are subject to change without notice. Assumptions, opinions and estimates are provided for illustrative purposes only and are subject to significant limitations. Reliance upon this information is at the sole discretion of the reader. This document includes information concerning financial markets that were developed at a particular point in time. This information is subject to change at any time, without notice, and without update. This commentary may also include forward-looking statements concerning anticipated results, circumstances, and expectations regarding future events. Forward-looking statements require assumptions to be made and are, therefore, subject to inherent risks and uncertainties. There is significant risk that predictions and other forward-looking statements will not prove to be accurate. Investing involves risk. Equity markets are volatile and will increase and decrease in response to economic, political, regulatory and other developments. Investments in foreign securities involve certain risks that differ from the risks of investing in domestic securities. Adverse political, economic, social or other conditions in a foreign country may make the stocks of that country difficult or impossible to sell. It is more difficult to obtain reliable information about some foreign securities. The costs of investing in some foreign markets may be higher than investing in domestic markets. Investments in foreign securities are also subject to currency fluctuations. The risks and potential rewards are usually greater for small companies and companies located in emerging markets. Bond markets and fixed-income securities are sensitive to interest rate movements. Inflation, credit and default risks are all associated with fixed-income securities. Diversification may not protect against market risk and loss of principal may result. Index returns are for information purposes only and do not represent actual strategy or fund performance. Index performance returns do not reflect the impact of management fees, transaction costs or expenses. Certain information contained in this document has been obtained from external parties, which we believe to be reliable; however, we cannot guarantee its accuracy.<\/p>\n

Guardian Capital LP manages portfolios for defined benefit and defined contribution pension plans, insurance companies, foundations, endowments and investment funds. Guardian Capital LP is a wholly owned subsidiary of Guardian Capital Group Limited, a publicly traded firm listed on the Toronto Stock Exchange. For further information on Guardian Capital LP, please visit www.guardiancapital.com<\/a>. All trademarks, registered and unregistered, are owned by Guardian Capital Group Limited and are used under license.<\/p>\n

Published: Published: February 12, 2026<\/p>\n