Do people hate the stock market? Or are institutional investors delusional?

Investor sentiment surveys measure the percentage of investors that are positive about the future of stock market returns (bullish) versus those that are negative (bearish).  The most commonly followed metric is the Yale investor sentiment survey which splits investors into two distinct groups: 1) institutional investors (pension funds, endowments, etc) and 2) individual investors.  For some time now, in fact nearly a decade, it seems a gap has widened between how institutions and individuals feel about the market.  The chart below put together by Bespoke Investment Group clearly shows that individuals have been more cautious than institutions over the last ten years or so.

Investor sentiment

Most articles we read draw the conclusion that individuals are being too cautious since the financial crisis, and even that the Millennial Generation is permanently spooked because they experienced the financial crisis in their formative years.  Is that driving this?  Not sure that’s the case as the gap seemed to open up well before the crisis.  Another way to look at this, of course, is that institutions are delusional about the future prospects of the market and are overconfident relative to individuals.  Perhaps it’s a bit of both.