The percentage of individual investors describing their six-month outlook for stocks as “neutral” is at its highest level of the year, according to the latest AAII Sentiment Survey. The rise occurred as optimism fell below 30% for the first time in six weeks and pessimism rebounded.
Bullish sentiment, expectations that stock prices will rise over the next six months, fell 6.6 percentage points to 27.2%. Optimism was last below 30% on February 17 (27.6%). The drop keeps bullish sentiment below its historical average of 39.0% for the 21st consecutive week and the 54th out of the past 56 weeks.
Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, jumped 4.6 percentage points to 47.1%. Neutral sentiment was last higher on December 30, 2015 (51.3%). This is the ninth consecutive week and the 61st out of the past 65 weeks with a neutral sentiment reading above its historical average of 31.0%.
Bearish sentiment, expectations that stock prices will fall over the next six months, rose 2.0 percentage points to 25.8%. The increase ends a six-week, 25-percentage-point slide. Nonetheless, pessimism is below its historical average of 30.0% for a fifth consecutive week.
Optimism is back at an unusually low level (more than one standard deviation below its historical average). At the same time, neutral sentiment remains at an unusually high level. Such readings have historically been followed by better-than-average gains in the S&P 500, though there is no guarantee that history will repeat.
In the backdrop of this week’s survey period, there was a bit of volatility in the major stock indexes, in addition to the headlines relating to the March 22 terrorist attack in Belgium. The presidential election is also weighing on individual investor sentiment, as the responses to this week’s special question show.
Giving individual investors cause for concern is the slow pace of U.S. economic growth and uncertain global economic growth, terrorism and global unrest, lackluster corporate earnings and the prevailing level of valuations. Some AAII members, however, are encouraged by the sustained domestic economic growth, expected corporate earnings growth and still-low energy prices.
This week’s AAII Sentiment Survey results:
- Bullish: 27.2%, down 6.6 percentage points
- Neutral: 47.1%, up 4.6 percentage points
- Bearish: 25.8%, up 2.0 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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