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AAII Sentiment Survey: Neutral Sentiment Rises to Highest Level Since Early November

The percentage of individual investors describing their short-term market outlook as “neutral” decreased from last week, while pessimism has now been above 30% for three consecutive weeks for the first time since the election, according to the latest AAII Sentiment Survey. Optimism bounced back slightly after declining three weeks in a row.

Bullish sentiment, expectations that stock prices will rise over the next six months, increased 1.2 percentage points to 32.8%. Optimism was last lower on November 2, 2016 (23.6%). The historical average is 38.5%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, declined 1.9 percentage points to 33.0%. This is the fourth time neutral sentiment has been above its historical average of 31.0% since the election.

Bearish sentiment, expectations that stock prices will fall over the next six months, edged up 0.7 percentage points to 34.2%. Pessimism was last higher on November 2, 2016 (34.3%). This is the first time that bearish sentiment is above its historical average of 30.5% for three weeks in a row since the election.

Since starting 2017 at 46.2%, bullish sentiment has pulled back by a cumulative 13.4 percentage points. Over the same period, neutral sentiment and bearish sentiment have risen by 4.5 and 8.9 percentage points, respectively. (The numbers are rounded.) All three of the indicators remain within their typical historical ranges.

At time of publication, the Dow Jones industrial average, S&P 500 and NASDAQ Composite are all on course for weekly losses. U.S. indexes have pulled back in recent sessions, as investors weigh the potential headwinds and tailwinds of President Trump’s potential policies. On the one hand, tax cuts and fiscal stimulus could boost the U.S. economy, but on the other, protectionist policies could hamper foreign trade.

Also influencing investor sentiment are valuations, earnings, consumer sentiment and the magnitude and timing of future interest rate increases. According to Thomson Reuters, roughly 44% of S&P 500 companies have reported quarterly earnings, and of those that have reported, 66% have beaten earnings expectations while 48% have beaten revenue expectations.

This week’s AAII Sentiment Survey results:

  • Bullish: 32.8%, up 1.2 percentage points
  • Neutral: 33.0%, down 1.9 percentage points
  • Bearish: 34.2%, up 0.7 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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