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AAII Sentiment Survey: Optimism Declines; Now Back to Typical Level

Optimism among individual investors fell back into its typical historical range for the first time since mid-December. At the same time, both neutral and bearish sentiment rebounded in the latest AAII Sentiment Survey.

Bullish sentiment, expectations that stock prices will rise over the next six months, fell 8.7 percentage points to 45.5%. Optimism was last lower on December 14, 2017 (45.0%). Even with the decline, bullish sentiment remains above its historical average of 38.5% for the seventh consecutive week.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, jumped 6.0 percentage points to 30.5%. Neutral sentiment was last higher on November 30, 2017 (32.4%). Even with the rise, neutral sentiment remains below its historical average of 31.0% for the eighth consecutive week.

Bearish sentiment, expectations that stock prices will fall over the next six months, rebounded by 2.6 percentage points to 24.0%. Nonetheless, pessimism remains below its historical average of 30.5% for the seventh consecutive week.

Levels of optimism between 28.1% and 48.6% are considered to be typical. Prior to this week’s reading, bullish sentiment had been at an unusually high level for five consecutive weeks. Such readings have historically been followed by lower-than-average returns for the S&P 500 index over the preceding six- and 12-month periods.

Some individual investors are encouraged by the record highs for the major indexes, the tax cuts and/or the Federal Reserve’s decision to continue raising interest rates at a gradual pace. Other individual investors are concerned about the possibility of a pullback or a more severe drop occurring. Even many investors who are optimistic about the overall direction of stocks expect a return of volatility this year. Also affecting investor sentiment are earnings growth, economic growth, valuations and the lack of volatility. Washington politics remain at the forefront of many individual investors’ minds.

This week’s AAII Sentiment Survey results:

  • Bullish: 45.5%, down 8.7 percentage points
  • Neutral: 30.5%, up 6.0 percentage points
  • Bearish: 24.0%, up 2.6 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.). The survey and its results are available online at: www.aaii.com/sentimentsurvey.

Want to weigh in? Take the survey yourself and see results online at 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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