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AAII Sentiment Survey: Optimism Jumps to a 5-Week High

sentiment chart 08-18-16

Optimism about the six-month direction of stock prices is at a five-week high in the latest AAII Sentiment Survey. Neutral sentiment fell and pessimism is slightly lower.

Bullish sentiment, expectations that stock prices will rise over the next six months, jumped 4.3 percentage points to 35.6%. Optimism was last higher on July 13, 2016 (36.9%). The increase is not large enough to prevent bullish sentiment from staying below its historical average of 38.5% for the 41st consecutive week and the 74th out of the past 76 weeks.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, fell 3.9 percentage points to 38.1%. Neutral sentiment was last lower on June 29, 2016 (37.7%). Even with the decline, neutral sentiment is above its historical average of 31.0% for the 29th consecutive week.

Bearish sentiment, expectations that stock prices will fall over the next six months, declined 0.4 percentage points to 26.4%. This is the seventh consecutive week that pessimism is below its historical average of 30.5%. It is also the fifth time in seven weeks that bearish sentiment has been within a 0.3-percentage-point range.

The improvement in sentiment is occurring as the large-cap indexes continue to trade at or near record highs and small-cap stocks are experiencing upward momentum. Most individual investors are keeping their outlook tempered, however. This week is just the sixth in this calendar year with more than one out of three survey respondents describing themselves as being bullish about the six-month direction of stock prices. Optimism has not been above its historical average of 38.5% since November 4, 2015, when it registered 39.0%.

This summer’s upward movement in stock prices, the perceived lack of investment alternatives and sustained, albeit slow, economic growth are giving some individual investors reason to be optimistic. Causes for concern are prevailing valuations, the presidential election, global economic uncertainty (including Brexit) and disappointment with corporate earnings growth.

This week’s AAII Sentiment Survey results:

  • Bullish: 35.6%, up 4.3 percentage points
  • Neutral: 38.1%, down 3.9 percentage points
  • Bearish: 26.4%, down 0.4 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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