The number of individual investors expecting stock prices to rise over the short term is at a four-week low, according to the latest AAII Sentiment Survey. Neutral sentiment rebounded strongly, while pessimism pulled back slightly.
Bullish sentiment, expectations that stock prices will rise over the next six months, fell 3.4 percentage points to 22.0%. Optimism was last lower on May 25, 2016 (17.8%). The drop makes this the eighth time in nine weeks that fewer than three out of 10 survey respondents are optimistic. It is also the 33rd consecutive week and the 66th out of the past 68 weeks with bullish sentiment below its historical average of 38.5%.
Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rebounded by 5.7 percentage points to 42.8%. The rise follows last week’s four-month low. The increase keeps neutral sentiment above its historical average of 31.0% for the 21st consecutive week.
Bearish sentiment, expectations that stock prices will fall over the next six months, declined 2.3 percentage points to 35.2%. The drop follows last week’s four-month high, but is small enough to keep pessimism above its historical average of 30.5% on consecutive weeks for just the second time since February.
Uncertainty and lack of optimism continue to be trends suggested by our weekly survey. More than four out of 10 individual investors have described their short-term market outlook as “neutral” during 14 out of the first 25 weeks of this year. (Neutral sentiment readings above 40% are unusually high, meaning more than one standard deviation above the long-term average.) At the same time, optimism has only exceeded 30% just seven times this year.
Giving individual investors cause for concern is the slow pace of U.S. economic growth and uncertain pace of global economic growth, terrorism and global unrest, lackluster corporate earnings, the prevailing level of valuations, the forthcoming November elections and monetary policy. Some AAII members, however, are encouraged by sustained domestic economic growth, corporate earnings and the proximity of stock prices to their record highs.
This week’s AAII Sentiment Survey results:
- Bullish: 22.0%, down 3.4 percentage points
- Neutral: 42.8%, up 5.7 percentage points
- Bearish: 35.2%, down 2.3 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.
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.