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AAII Sentiment Survey: Neutral Stays High, Pessimism Falls

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Neutral sentiment is above 45% for a fourth consecutive week, while pessimism is down to a two-month low in the latest AAII Sentiment Survey. Bullish sentiment declined as well, but stayed within its recent range.

Bullish sentiment, expectations that stock prices will rise over the next six months, declined 0.6 percentage points to 30.8%. The decline puts optimism below its historical average of 39.0% for an eighth consecutive week, the longest such streak since June 19, 2014, through August 7, 2014.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rose 1.9 percentage points to 47.2%. The increase keeps neutral sentiment at or above 45% for the fourth consecutive week, the longest such streak since December 16, 1988, through January 6, 1989. It also keeps neutral sentiment above its historical average of 30.5% for the 17th consecutive week.

Bearish sentiment, expectations that stock prices will fall over the next six months, fell 1.2 percentage points to 22.0%. This is the lowest amount of pessimism registered by our survey since February 26, 2015 (20.3%). It is also the 14th week this year with a bearish sentiment reading below its historical average of 30.5%.

Neutral sentiment continues to be at an unusually high level. Historically, such readings have been correlated with better-than-average market performance over the following six- and 12-month periods. (See Analyzing the AAII Sentiment Survey Without Hindsight in the June 2014 AAII Journal for more information.) There is no guarantee history will repeat itself in the future, however.

Keeping some AAII members encouraged are the ongoing bull market, sustained economic expansion, earnings growth and still-accommodative monetary policy. Causing other AAII members to be cautious or pessimistic are prevailing valuations, recent price volatility, geopolitical events, the pace of economic growth, the impact of the stronger dollar on earnings growth and worries that a notable decline in stock prices could occur.

This week’s AAII Sentiment Survey results:

  • Bullish: 30.8%, down 0.6 percentage points
  • Neutral: 47.2%, up 1.9 percentage points
  • Bearish: 22.0%, down 1.2 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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