The Sentiment-Performance Divergence Framework – September 22, 2026

By LaRue Gibson on September 22, 2026

Semi-Monthly Brief

William Shakespeare famously quipped “What Is Past Is Prologue.”  Success in most endeavors, including investment markets, requires an understanding of historical antecedents and learning from their implications for the future. Perhaps you know the phrase “Those who fail to learn from history are destined to repeat it.”  We prefer to apply what has come before to improve the probability of success and reduce the chances of failure. “This time is different” remain the four most dangerous words in investing. Reviewing history, through statistical data, may help improve opportunity while possibly reducing the likelihood of disaster.

What Is the Sentiment-Performance Divergence Framework?

The Sentiment-Performance Divergence Framework measures the gap between actual market performance and the level of bullish sentiment that performance would historically justify. Rather than treating sentiment in isolation — where a high percentage of bulls is assumed to be universally bearish — we evaluate sentiment in context. When performance outpaces sentiment, it signals that a wall of worry remains intact and uncommitted capital sits on the sidelines. When sentiment outpaces performance, it signals complacency and diminished buying power.

We publish this brief bi-monthly to report the current quintile reading across three trailing regimes (63-day, 125-day, and 250-day) and the expected forward performance those readings have historically produced. For the complete methodology, definitions, scatter plots, and full quintile tables, we invite you to read the foundational paper: Past Is Prologue: The Sentiment-Performance Divergence Framework, available on our blog at LRG Wealth Advisors

Current Readings as of September 16, 2026

As of September 16, 2026, the Investors Intelligence survey reports 48.1% of advisers as bullish. The S&P 500 closed at 7,551.81 and delivered a trailing 63-day return of +0.5%, a trailing 125-day return of +14.0%, and a trailing 250-day return of +14.4%.[1] [2]

The Divergence Framework registers the following quintile readings:

The three trailing regimes continue to send a mixed message, but the medium- and longer-term readings have strengthened. The 63-day, 125-day, and 250-day residuals rank in the 32nd, 84th, and 62nd percentiles of their respective historical distributions. The dominant near-term signal remains the 63-day regime, which produces the strongest and most consistent forward performance signal in our research. The market has gained only +0.5% over the past 63 trading days, below the +3.0% return that 48.1% bulls would historically predict. The resulting -2.50 percentage-point residual remains in Quintile 2 and preserves a moderately cautionary near-term signal.

The 125-day regime has advanced to Quintile 5. Its +14.0% trailing return exceeds the sentiment-implied return by +8.45 percentage points, creating a strongly constructive medium-term reading. The 250-day regime has advanced to Quintile 4: its +14.4% trailing return exceeds the regression estimate by +3.98 percentage points, producing a moderately constructive longer-term signal.

The Regression Line Graphics

63-Day(3-Month) Trailing Performance vs. Bullish Sentiment

The current reading sits moderately below the regression line, placing us in Quintile 2. The market’s 3-month trailing return of +0.5% falls short of what 48.1% bulls would historically predict by -2.50 percentage points.

125-Day (6-Month) Trailing Performance vs. Bullish Sentiment

The current reading sits substantially above the regression line, placing us in Quintile 5. The 6-month trailing return of +14.0% exceeds the sentiment-implied return by +8.45 percentage points.

250-Day (12-Month) Trailing Performance vs. Bullish Sentiment

The current reading sits moderately above the regression line, placing us in Quintile 4. The 12-month trailing return of +14.4% exceeds the sentiment-implied return by +3.98 percentage points.

Expected Forward Performance

The tables below present the historical forward performance for each current quintile reading, compared against the unconditional rolling average — what the market has delivered at any random point since 1963:

63-Day Trailing Regime — Quintile 2 (Current Reading)

When the 63-day trailing regime registers Q2, historical forward median returns and win rates fall below the rolling averages across all three measured horizons. The 12-month median return has been +8.55%, compared with +10.62% for the rolling average, while the win rate has been 73.5%, compared with 74.9%. The signal argues for tempered near-term expectations rather than an outright bearish conclusion.

125-Day Trailing Regime — Quintile 5 (Current Reading)

A Q5 reading on the 125-day trailing regime has historically delivered above-average median returns and win rates across all three forward horizons. The largest advantage appears over the subsequent 63 days, where the median return has been +3.49% and the win rate 74.0%, compared with rolling averages of +2.64% and 66.8%.

250-Day Trailing Regime — Quintile 4 (Current Reading)

A Q4 reading on the 250-day trailing regime has historically delivered above-average forward median returns and win rates across all three measured horizons. The 6-month median return has been +6.85%, with a 76.8%-win rate, compared with rolling averages of +4.84% and 69.6%.

Summary

The 63-day regime — our strongest predictor — remains moderately cautionary at Q2. Recent market performance continues to lag the level of adviser optimism, and the historical forward medians and win rates for this regime remain below the rolling averages across every measured horizon.

That near-term caution is offset by stronger medium- and longer-term readings. The 125-day regime has moved to strongly constructive Q5, while the 250-day regime has moved to moderately constructive Q4. Both have historically produced above-average forward medians and win rates across all three measured horizons.

The data supports maintaining equity exposure while tempering near-term expectations. The wall of worry has rebuilt at the medium- and longer-term horizons, but the short-term signal has not yet returned to neutral or constructive territory.

We invite your reactions, thoughts, and questions. Take good care.

Methodology

For each regime, the S&P 500 trailing price return is calculated over an exact 63-, 125-, or 250-trading-day row lag. A linear regression estimates the trailing return historically associated with the current Investors Intelligence bullish percentage. The residual equals the actual trailing return minus the regression-predicted return. Residuals are ranked independently within each regime and divided into five equal groups, with Q1 representing the weakest performance relative to sentiment and Q5 the strongest. Forward-performance tables report the subsequent 63-, 125-, and 250-day outcomes historically associated with the current residual quintile. The September 16 observation is evaluated against the fixed 3,120-observation historical research sample.[1] [2]

Data Attribution: Investors Intelligence Bull/Bear Survey (January 1963 – September 2026); S&P 500 Index daily price data, Bloomberg Finance L.P. (December 1927 – September 2026); Federal Reserve Bank of St. Louis, FRED, for macroeconomic series incorporated in the supporting research; LRG Wealth Advisors analysis. Historical regressions and forward-performance tables use the fixed 3,120-observation research sample from January 1963 through July 14, 2026.[1] [2] [3]

Past performance does not guarantee future results. This communication does not constitute an offer to purchase or sell securities. Every investment strategy carries risk, and no strategy guarantees profitability. References to investment opportunities here do not guarantee future profit. Historical performance does not predict future results and should not be seen as a guarantee. Not all investors will find the investment opportunities mentioned suitable.

References

[1] Investors Intelligence Bull/Bear Survey, January 1963 – September 2026.[1]

[2] Bloomberg Finance L.P., S&P 500 Index daily price data, December 1927 – September 2026.[2]

[3] Federal Reserve Bank of St. Louis, FRED, supporting macroeconomic series.[3]

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