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Investor sentiment gauge 'gives me a lot of comfort,' strategist says

·Markets Reporter
·2-min read
In this article:
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Despite a volatile start to 2022, one bullishness sentiment gauge may be signaling the markets will still end the year with gains.

"If you look at the retail investor survey by AAII [American Association of Individual Investors] net bullishness last week, fell back down ... It almost got back to March 2020 lows," Lori Calvasina, RBC Capital Markets' head of U.S. equity strategy, told Yahoo Finance Live.

"That's extremely important, because historically when net bulls are below minus 10%, we're obviously far bellow that right now. Markets are up 86% of the time on a twelve-month forward basis, with a 15% average return," said Calvasina.

"If you go back to 2020 we saw net bullishness just really in the toilet for about 3 months we were below that 10% threshold, but we got there in March, right around the market bottom. It ended being a very good signal in terms of keeping people in the market," she added.

March 23, 2020, marked the major average lows following the onset of the pandemic. The heavy selloff was followed by a stunning rally in the months ahead.

"That is something that gives me a lot of comfort. That even if we haven't seen the downward move play out fully yet — that we are going to make some modest gains in this market before the end of the year," said Calvasina.

A staff member from the Royal Academy of Arts poses with “Study of a Bull”, 1991, by Francis Bacon in London, Britain, January 25, 2022.  REUTERS/Peter Cziborra
A staff member from the Royal Academy of Arts poses with “Study of a Bull”, 1991, by Francis Bacon in London, Britain, January 25, 2022. REUTERS/Peter Cziborra

Earnings

Apart from the Fed's key monetary meeting this week, the strategist is looking for clues from the many companies which have yet to still report quarterly earnings.

"We're going to be getting a lot of boots-on-the-ground color from companies in the next few weeks. That ... could either exacerbate this weakness or help add some stability in the markets, depending on what companies say," said Calvasina.

Ines is a markets reporter covering stocks from the floor of the New York Stock Exchange. Follow her on Twitter at @ines_ferre

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