Optimism among individual investors about the short-term direction of the stock market is at a five-week high. The latest AAII Sentiment Survey also shows declines in the proportion of individual investors describing their short-term outlook as being “neutral” or “bearish.”
Bullish sentiment, expectations that stock prices will rise over the next six months, jumped 8.1 percentage points to 45.0%. Optimism was last higher on November 9, 2017 (45.1%). This is the first time in five weeks that bullish sentiment is above its historical average of 38.5%.
Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, fell 2.0 percentage points to 26.9%. Neutral sentiment was last lower on November 2, 2017 (26.4%). The historical average is 31.0%.
Bearish sentiment, expectations that stock prices will fall over the next six months, plunged 6.1 percentage points to 28.1%. Pessimism was last lower on November 9, 2017 (23.1%). The historical average is 30.5%.
Bullish sentiment is above its historical average for just the 10th week this year. Though optimism has been below average for much of the year (an average reading of 34.5%), 2017 has not been a year of excessively low optimism. Rather, this year is on track to rank eighth (out of 31) in terms of having the lowest average calendar-year bullish sentiment reading.
Most of this week’s results were recorded before the outcome of Alabama’s special election were known and yesterday’s Federal Open Market Committee meeting statement and committee member forecasts were released. Our previous polling of individual investors shows that most are not currently making investment decisions based on the pending tax legislation. While some of our members are optimistic about the prospects of tax reform being passed, about 40% of those polled in a different weekly AAII survey said the proposed legislation could hurt them.
This year’s record highs for the major U.S. stock indexes have encouraged some individual investors, though others have expressed concerns about the possibility of a pullback or a more severe drop occurring. 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: 45.0%, up 8.1 percentage points
- Neutral: 26.9%, down 2.0 percentage points
- Bearish: 28.1%, down 6.1 percentage points
- Bullish: 38.5%
- Neutral: 31.0%
- Bearish: 30.5%
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