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AAII Sentiment Survey: Bullish Sentiment Rebounds

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Optimism rebounded in this week’s AAII Sentiment Survey, as neutral sentiment pulled back from last week’s eight-year high.

Bullish sentiment, expectations that stock prices will rise over the next six months, rebounded by 3.9 percentage points to 39.5%. The rise puts bullish sentiment slightly above its long-term historical average of 39.0%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged, pulled back by 5.5 percentage points to 33.9%. Even with the decline, neutral sentiment is above its historical average of 30.5% for the 11th consecutive week.

Bearish sentiment, expectations that stock prices will fall over the next six months, rose 1.6 percentage points to 26.6%. Though the fourth consecutive weekly increase, pessimism is below its historical average of 30.5% for the sixth consecutive week and the 11th time in 14 weeks.

Neutral sentiment pulled back after reaching its highest level since April 14, 2005 last week. A bit more enthusiasm for stocks, differences in which AAII members responded to this week’s survey and a bit of reversion to the historical average all were contributing factors.

The current levels of bullish and neutral sentiment imply individual investors are not excessively optimistic about the short-term direction of the markets, although the majority is not expecting stock prices to be lower six months from now either. Some individual investors are encouraged by signs of continued economic growth, sustained earnings growth and the length of the current rally. Others, however, are concerned about prevailing valuations, the slow pace of economic growth, interest rate uncertainty and a lack of progress on key issues by Washington politicians.

Since we are in the middle of summer, this week’s special question asked AAII Members how closely they monitor their portfolios while on vacation as compared to when they are home. Responses fell into three categories: about the same (38%), less often (26%) and don’t monitor (29%). Some AAII members said the frequency at which they check their portfolios while on vacation depends on their access to the Internet. Other respondents said the point of a vacation is to get away from everything.

This week’s AAII Sentiment Survey results:

  • Bullish: 39.5%, up 3.9 percentage points
  • Neutral: 33.9%, down 5.5 percentage points
  • Bearish: 26.6%, up 1.6 percentage points

Historical averages:

  • Bullish: 39.0%
  • Neutral: 30.5%
  • 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.) The survey and its results are available online at: http://www.aaii.com/sentimentsurvey

 

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