The percentage of individual investors describing their short-term market outlook as “neutral” is at its highest level since the election, according to the latest AAII Sentiment Survey. Pessimism is also higher, while optimism has continued to pull back.
Bullish sentiment, expectations that stock prices will rise over the next six months, fell 5.4 percentage points to 31.6%. 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, rose 4.6 percentage points to 34.9%. Neutral sentiment was last higher on November 2, 2016 (42.0%). This is just the third 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 0.8 percentage points to 33.5%. 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% on back-to-back weeks since the election.
Since starting 2017 at 46.2%, bullish sentiment has pulled back by a cumulative 14.6 percentage points. Over the same period, neutral sentiment and bearish sentiment have risen by 6.4 and 8.3 percentage points, respectively. (The numbers are rounded.) All three of the indicators remain within their typical historical ranges.
As I discussed last week, the record highs set by the NASDAQ have drawn a mixed reaction, with some individual investors viewing it as a positive and others viewing it as a sign that the market is overvalued or at risk of pullback. The survey period runs Thursday through Wednesday, and many of this week’s votes were recorded before the Dow Jones industrial average rose above 20,000 yesterday.
The potential impact that President Trump could have on the economy is causing uncertainty or concern among some investors, but encouraging others. Also influencing investor sentiment are valuations, earnings, consumer sentiment and the magnitude and timing of future interest rate increases.
This week’s AAII Sentiment Survey results:
- Bullish: 31.6%, down 5.4 percentage points
- Neutral: 34.9%, up 4.6 percentage points
- Bearish: 33.5%, up 0.8 percentage points
- 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.
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