Optimism among individual investors about the short-term direction of stock prices is above 30% for the first time since Thanksgiving, according to the latest AAII Sentiment Survey. Pessimism fell to its lowest level of 2016 as it continued to pull back from its recent highs. Neutral sentiment, meanwhile, rose.
Bullish sentiment, expectations that stock prices will rise over the next six months, rose 3.6 percentage points to 31.2%. As noted above, this is the highest level of optimism recorded by our survey since November 26, 2015 (32.4%). The rebound ends a streak of 12 consecutive weeks with bullish sentiment readings below 30%, the longest such streak since 1993. Even with the improvement, optimism remains below its historical average of 39.0% for the 16th consecutive week and the 49th out of the past 51 weeks.
Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rose 2.8 percentage points to 37.4%. This is the 56th time in the past 60 weeks that neutral sentiment is above its historical average of 31.0%.
Bearish sentiment, expectations that stock prices will fall over the next six months, plunged 6.4 percentage points to 31.4%. Pessimism was last lower on December 31, 2015 (23.6%). Even with the drop, pessimism remains above its historical average of 30.0% for an eighth consecutive week and for the 10th time in 11 weeks.
After nearly hitting a three-year high two weeks ago, bearish sentiment has fallen by a cumulative 17.3 percentage points. Over the same period, bullish sentiment has rebounded by a cumulative 12.0 percentage points. The shift has occurred as both large- and small-cap stocks appear to have set a short-term bottom.
The recent improvement in sentiment has only been enough to lift optimism to just above the lower end of its normal historical range. Many individual investors are still concerned about the pace of economic growth in the U.S., the pace of economic growth in China, tensions in the Middle East, the rate of earnings growth and prevailing valuations.
This week’s AAII Sentiment Survey results:
- Bullish: 31.2%, up 3.6 percentage points
- Neutral: 37.4%, up 2.8 percentage points
- Bearish: 31.4%, down 6.4 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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