Sentiment and the Market: A Visual Analysis

Chart 1: Sentiment Index

This chart tracks a sentiment index, likely constructed from various market indicators and news sentiment analysis. The period circled, coinciding with the COVID-19 pandemic, shows a sharp decline in sentiment, reflecting the uncertainty and fear that gripped the markets during that time.

Chart 2: S&P 500 & VIX 

This chart juxtaposes the S&P 500 index, a broad measure of the U.S. stock market, with the VIX, often referred to as the "fear index."

• S&P 500: The circled area highlights a period of rapid growth in the S&P 500, likely fueled by market optimism.
• VIX: Conversely, the VIX shows a decline during this period, indicating decreased fear and volatility in the market. The annotation "reversed behavior" suggests an inverse relationship between the two, which is typical as lower volatility often accompanies rising markets.

Chart 3: University of Michigan Consumer Sentiment & AAII Bull-Bear Ratio

This chart compares two sentiment indicators:

• University of Michigan Consumer Sentiment: This widely followed index reflects consumer confidence in the economy. The circled area shows a dip in sentiment, possibly corresponding to an economic downturn or period of uncertainty.
• AAII Bull-Bear Ratio: This indicator measures the ratio of bullish investors to bearish investors. The circled area suggests a period where bearish sentiment dominated, aligning with the dip in consumer sentiment.