Pessimism backed down from its nearly three-year high, but four out of 10 individual investors remain bearish in the latest AAII Sentiment Survey. Optimism jumped, while neutral sentiment rose slightly.
Bullish sentiment, expectations that stock prices will rise over the next six months, surged 8.2 percentage points to 29.8%. Though at a nine-week high, optimism is below its historical average of 39.0% for the 45th out of the past 47 weeks.
Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, edged up 0.5 percentage points to 30.3%. This is the first time neutral sentiment is below its historical average of 31.0% on consecutive weeks since December 25, 2014, through January 1, 2015.
Bearish sentiment, expectations that stock prices will fall over the next six months, pulled back by 8.7 percentage points to 40.0%. This is the first time pessimism has been at or above 40% on three consecutive weeks since October 18 through November 1, 2012. This is also the sixth time in the past seven weeks that bearish sentiment is above its historical average of 30.0%.
A stabilizing of stock prices over the past seven days likely helped to reduce the level of pessimism in our survey. Nonetheless, many individual investors still anticipate further declines. The slowing pace of economic growth in China, escalating tensions in the Middle East, the pace of economic growth in the U.S., the rate of earnings growth and prevailing valuations are all influencing investor sentiment. Though some individual investors view the current correction as a buying opportunity, optimism about the short-term direction of stock prices has not exceeded 30% since Thanksgiving.
The survey results were largely collected before the release of yesterday’s Federal Open Market Committee statement.
This week’s AAII Sentiment Survey results:
- Bullish: 29.8%, up 8.2 percentage points
- Neutral: 30.3%, up 0.5 percentage points
- Bearish: 40.0%, down 8.7 percentage points
- Bullish: 39.0%
- Neutral: 31.0%
- Bearish: 30.0%
The AAII Sentiment Survey has been conducted weekly since July 1987 and asks AAII members whether they think stock prices will rise, remain essentially flat or fall over the next six months. The survey period runs from Thursday (12:01 a.m.) to Wednesday (11:59 p.m.).
Want to weigh in? Take the survey yourself and see results online at http://www.aaii.com/sentimentsurvey.
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