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AAII Sentiment Survey: Optimism Ends 2016 at a Five-Week High

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(Special note: I am out of the office this week. On behalf of everyone at AAII, have a happy, healthy and prosperous new year.)

Optimism among individual investors is ending 2016 on a high note. The latest AAII Sentiment Survey shows bullish sentiment rising to a five-week high. Neutral sentiment is also higher this week, while pessimism is lower.

Bullish sentiment, expectations that stock prices will rise over the next six months, rose 1.0 percentage points to 45.6%. This is the third-highest level of optimism recorded by our survey in 2016. (Bullish sentiment was higher on November 16, at 46.7%, and November 23, at 49.9%.) This week’s increase puts optimism above 40% for the seventh consecutive week and above its historical average of 38.5% for the eighth consecutive week.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rose 2.5 percentage points to 28.7%. Even with the increase, neutral sentiment remains below its historical average of 31.0% for the fourth consecutive week and the sixth time in seven weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, fell 3.4 percentage points to 25.7%. The drop keeps pessimism below its historical average of 30.5% for the seventh time in eight weeks.

Neutral sentiment is below 30% for a third consecutive week. The last time a similar streak occurred was more than two years ago: November 12 through November 26, 2014. Since the start of 2014, neutral sentiment has only been below 30% 18 times out of the more than 150 weekly readings over that period.

Bullish sentiment, conversely, is at its third-highest level of 2016. Compared to 12 months ago, optimism is up by a cumulative 20.5 percentage points. As noted in previous weeks, the shift in sentiment began during the election week survey period. The current seven-week stretch of plus-40% readings is the longest such streak since a nine-week stretch between October 15 and December 10, 2014.

Optimism is not at excessive levels. Though many individual investors are optimistic about the short-term direction of stock prices, others are more cautious. The potential impact President-elect Donald Trump could have on the economy is encouraging some individual investors and creating uncertainty or concern among others. Also influencing investor sentiment are valuations, the magnitude and timing of future interest rate hikes, and the pace of economic and earnings growth.

This week’s AAII Sentiment Survey results:

  • Bullish: 45.6%, up 1.0 percentage points
  • Neutral: 28.7%, up 2.5 percentage points
  • Bearish: 25.7%, down 3.4 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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