Optimism among individual investors about the short-term direction of the stock market is at its highest level in eight months according to the latest AAII Sentiment Survey. Both neutral and bearish sentiment pulled back below their historical averages.
Bullish sentiment, expectations that stock prices will rise over the next six months, jumped 9.4 percentage points to 45.7%. Optimism was last higher on February 14, 2018 (48.5%). The increase puts bullish sentiment above its historical average of 38.5% for the first time in four weeks.
Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, fell 3.5 percentage points to 29.2%. Neutral sentiment was last lower on July 11, 2018 (27.8%). This is just the second time in 33 weeks that neutral sentiment is below its historical average of 31.0%.
Bearish sentiment, expectations that stock prices will fall over the next six months, fell 6.0 percentage points to 25.1%. This is a five-week low. It is also the first time pessimism is below its historical average of 30.5% in four weeks.
At current levels, all three indicators are within their typical historical ranges.
This week’s results put bullish sentiment at its fifth-highest level of the year. Since the end of February, optimism has only been above average nine times. It has not stayed above average for a span of more than three consecutive weeks since January.
Tariffs and the possibility of an escalating trade war remain front and center on the minds of many individual investors. Also influencing sentiment are Washington politics (including President Donald Trump), midterm elections, economic growth, valuations and corporate profits. The record highs in the Dow Jones industrial average likely gave encouragement to some individual investors, but not all.
This week’s AAII Sentiment Survey results:
- Bullish: 45.7%, up 9.4 percentage points
- Neutral: 29.2%, down 3.5 percentage points
- Bearish: 25.1%, down 6.0 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.
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