Behind the Sentiment Disparity: Main Street vs. Wall Street

By Dian L. Chu
hat tip: Economic Forecasts & Opinions
Sunday, March 14, 2010

According to a gauge derived from data compiled by The American Association of Individual Investors (AAII), bullishness on U.S. stocks is beginning to emerge after the market’s rally in the past year.

The latest AAII Sentiment Survey reading shows optimists outweighed pessimists for the first time since January 2008, three months after the previous bull market ended. (See Chart from Bloomberg)

A Disparity in Sentiment

In contrast to the cheery mood of the markets, the latest readings from consumers and small business owners indicate economic sentiment isn’t improving, despite signs of a factory rebound and less gloom on the labor front.

The National Federation of Independent Business said its optimism index for small business owners fell back in February to its December reading. The IBD/TIPP Economic Optimism Index dropped 3% in March, well below its average of the past year.

Meanwhile, The U.S. consumer sentiment also dipped in early March, according to the University of Michigan Consumer Sentiment Index.