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AAII Sentiment Survey: 8-Month Low for Pessimism

The percentage of individual investors describing their short-term outlook for stocks as “bearish” is at its lowest level in eight months. The latest AAII Sentiment Survey also shows neutral sentiment rebounding back above 40% and optimism declining.

Bullish sentiment, expectations that stock prices will rise over the next six months, pulled back by 1.0 percentage points to 34.5%. Optimism remains below its historical average of 38.5% for the 22nd consecutive week and the 27th time out of the last 28 weeks.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rose 2.5 percentage points to 41.2%. This is the fourth time in five weeks with an unusually high neutral sentiment reading (above 40%). It is also the 13th consecutive week and the 18th out of the last 19 weeks with a neutral sentiment reading above the historical average of 31.0%.

Bearish sentiment, expectations that stock prices will fall over the next six months, declined 1.5 percentage points to 24.3%. Pessimism was last lower on November 23, 2016 (22.1%). Nonetheless, bearish sentiment remains within its typical historical range. Pessimism does, however, remain below its historical average of 30.5% for the 11th time out of the last 13 weeks.

The eight-month low in pessimism should not be construed as implying individual investors are brushing aside the possibility of a market drop occurring within the next six months. Many do view it as a possibility, as we discussed on our blog earlier this week. At the same time, the upward momentum seen in large- and small-cap stocks is providing a reason to expect stocks to rise. In between are several other factors at play, including the Trump administration’s ability (or lack thereof) to move forward on economic and tax policy, valuations, earnings and interest rates/monetary policy.

This week’s AAII Sentiment Survey:

  • Bullish: 34.5%, down 1.0 percentage points
  • Neutral: 41.2%, up 2.5 percentage points
  • Bearish: 24.3%, down 1.5 percentage points

Historical averages:

  • Bullish: 38.5%
  • Neutral: 31.0%
  • Bearish: 30.5%

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.

If you want to become an effective manager of your own assets and achieve your financial goals, consider a risk-free 30-day Trial AAII Membership.

 

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