Investor Sentiment

Reading market sentiment used to mean watching headlines and gut-checking investor mood. Now, AI tools can crunch news feeds, social chatter, and market data in seconds-giving you real-time "pulse" on how investors are feeling about a stock. When you're investing, do you rely on sentiment indicators to guide your timing-or do you stick to fundamentals and ignore the market's mood swings? 

Let's talk approach. In fast-moving markets, would you want AI-driven sentiment tools helping you spot shifts before they hit the charts-or do you think sentiment is just noise that distracts from long-term strategy?

If you haven't yet, check out the August article "Mastering the Market Sentiment of a Stock With AI Tools." It explores how AI can interpret investor sentiment and what it means for smarter, faster decision-making. 

It would seem prudent to do at least one well designed study, the longer the better, to compare AI sentiment to the actual outcome prior to entrusting AI with any influence or decision authority.  The SPIVA results comparing active management results, which represent such a study of manager sentiment, are not a shining example of the successful application of sentiment.  Whether AI sentiment is any better remains to be demonstrated.

Denise Chisholm of FID posts her version of "Charts of the Week" on LinkedIn.com. I find it a good source to help me understand how economic indicators influence market indicators. I posted this comment to her 08/16/25 article.

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"Using data to make decisions is smart, but government data are often late and appear to be mere estimates based on sampling that is 'adjusted' to represent the 2020 census. One example of this induced blindness is the major population shifts in 6 blue states to 6 red states (WSJ 08/16/25) that could change 24 seats on the 2026 election map. 

Despite sharing the same limitations of inherent data lags where SEC 10Q financial data and EPS data are reported quarterly, for example, MARKET data are always looking forward because past prices are irrelevant to future buying/selling decisions and, more importantly, profits, which are what investors rely on to recover the money they invested. 

The most interesting market momentum force is investor sentiment, which several organizations measure weekly (AAII) to monthly (Univ. MI, Conf. Bd.).

AAII has assembled 13 indicators that link INDIVIDUAL INVESTOR sentiment to MARKET sentiment and uses AI ChatGPT to analyze and provide a narrative from the data produced EACH WEEK.

The AAI Investor Sentiment – Market Sentiment dashboard was launched in August 2025 and provides some very interesting insight so far, but it's too soon to tell, although these are propitious times for markets to "move" abruptly. 

Having access to an analysis of the PROBABILITIES from prior market behavior based on this set of indicators is a great learning experience to help understand current and future market behavior."

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BARRY JOHNSON
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Barry, I'd agree that past behavior of "the market" has predictive value for the future market, but only in the long run. In the short run, the market is a neurotic schizophrenic on steroids. That is, it is totally unpredictable. In December of 2019, who saw the early-2020 crash coming? Was there anything in the "sentiment" indicators that you could have relied upon to predict it? Did any measure of market sentiment make that event more or less probable?

I humbly suggest to you that using "sentiment" to predict future short-term (short-term can be taken to mean within the next 10 years) movements in the market (or even probabilities of such future movements) is a fool's errand. And the only worthwhile measure of sentiment is market prices themselves.

I'd prefer to waste my time learning how to read the future through thrown chicken bones than to try to predict future market movements using concocted "tools" mixed with AI. 

Nevertheless, I know you like intellectual play, and playing around with this sentiment stuff is fun to you, so have at it. Be sure to let me know when you have it all figured out. Just please, PLEASE, don't invest any more money into it than you've already paid for AAII's "premium" service! 😉