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AAII Sentiment Survey: Optimism Moderates, Remains Above Average

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The percentage of individual investors describing their short-term outlooks for stock prices as either bullish or neutral moderated in the latest AAII Sentiment Survey. Pessimism rebounded, but remained at a low level.

Bullish sentiment, expectations that stock prices will rise over the next six months, declined 1.6 percentage points to 45.4%. Even with the pullback, this is the 25th out of the last 29 weeks that optimism is above its historical average of 39.0%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, declined 0.8 percentage points to 34.3%. This week is the eighth consecutive week with neutral sentiment above its historical average of 30.5%.

Bearish sentiment, expectations that stock prices will fall over the next six months, reversed last week’s drop by rebounding 2.4 percentage points to 20.3%. Pessimism is right on the edge of what we consider to be an unusually low level. The historical average for bearish sentiment is 30.5%.

Although the major indexes rose for several consecutive days, bullish and neutral sentiment pulled back after recently setting near-term highs. As noted above, both measures continue to remain above their respective historical averages.

Keeping AAII members encouraged are the upward momentum of stock prices, comparatively low energy prices, earnings growth and sustained economic expansion. Causing other members to be cautious or pessimistic are prevailing valuations, disappointing earnings or guidance from certain companies, geopolitical events, the impact of lower oil prices on energy stocks, the pace of economic growth and worries that an even larger decline in stock prices could occur.

This week’s AAII Sentiment Survey results:

  • Bullish: 45.4%, down 1.6 percentage points
  • Neutral: 34.3%, down 0.8 percentage points
  • Bearish: 20.3%, up 2.4 percentage points

Historical averages:

  • Bullish: 39.0%
  • Neutral: 30.5%
  • 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.). The survey and its results are available online at: http://www.aaii.com/sentimentsurvey.

 

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