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AAII Sentiment Survey: Both Optimism and Pessimism Surge

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Both optimism and pessimism jumped in the latest AAII Sentiment Survey. Neutral sentiment, meanwhile, plunged to a nearly nine-month low.

Bullish sentiment, expectations that stock prices will rise over the next six months, jumped 5.7 percentage points to 32.5%. Optimism was last higher on June 25, 2015 (35.6%). (Bullish sentiment was also at 32.5% on July 23, 2015.) Even with this week’s increase, bullish sentiment remains below its historical average of 39.0% for the 25th consecutive week, the longest such streak since a 29-week stretch in 1993.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, plunged 10.6 percentage points to 29.2%. The large drop puts neutral sentiment at its lowest level since January 1, 2015 (29.0%). It also ends a record streak of 33 consecutive weeks with readings above the historical average of 31.0%.

Bearish sentiment, expectations that stock prices will fall over the next six months, surged 4.9 percentage points to 38.3%. Pessimism was last higher on July 29, 2015 (40.7%). This week’s rise keeps bearish sentiment above its historical average of 30.0% for a fifth consecutive week.

The recent streak of above-average bearish sentiment is part of a broader shift we’ve seen this summer. Pessimism has been above its historical average during eight out of the past 12 weeks. During the entire 52-week period prior to June 2015, bearish sentiment was above its historical average of 30.0% just nine times. Furthermore, bearish sentiment has now exceeded bullish sentiment for five consecutive weeks. This is the longest such occurrence since a seven-week stretch between October 11 and November 22, 2012.

This week’s concurrent increases in optimism and pessimism are indicative of the mixed view that individual investors likely have of the surge in volatility that occurred over the survey period, which runs from 12:01 a.m. on Thursday to 11:59 p.m. on Wednesday. Some members had previously stated that they were looking for a drop in prices to bring valuations down and create a buying opportunity. Others may be concerned that the market is at risk of further downside.

This week’s AAII Sentiment Survey results:

  • Bullish: 32.5%, up 5.7 percentage points
  • Neutral: 29.2%, down 10.6 percentage points
  • Bearish: 38.3%, up 4.9 percentage points

Historical averages:

  • 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.). The survey and its results are available online at: http://www.aaii.com/sentimentsurvey.

 

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