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AAII Sentiment Survey: Optimism Now Is Unusually Low

Optimism among individual investors about the short-term direction of the stock market decreased further, falling to a three-month low. This week’s AAII Sentiment Survey also showed higher neutral sentiment and lower pessimism.

Bullish sentiment, expectations that stock prices will rise over the next six months, declined 0.6 percentage points to 27.9%. Optimism was last lower on April 11, 2018 (26.1%). The historical average is 38.5%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rebounded by 2.1 percentage points to 32.9%. The rise keeps neutral sentiment above its historical average of 31.0% for the 20th consecutive week.

Bearish sentiment, expectations that stock prices will fall over the next six months, pulled back by 1.5 percentage points to 39.3%. The historical average is 30.5%.

Optimism is now at an unusually low level (more than one standard deviation below its historical average). Historically, unusually low bullish sentiment readings have been followed by above-average, and above-median, six- and 12-month returns in the S&P 500 index. (We published a table with the historical data last December.) However, there is no guarantee that history will repeat.

This week’s decline in pessimism puts bearish sentiment back within its typical range. The upper end of this range is 39.8%.

Many—but not all—individual investors anticipate continued volatility and/or think that the current political backdrop could have a further impact on the stock market. Trade policy is influencing some individual investors’ sentiment as well. While many approve of the Federal Reserve’s plan to continue gradually raising interest rates, some AAII members are concerned about the impact that rising rates will have. Also influencing sentiment are valuations, tax cuts, earnings growth and economic growth.

This week’s AAII Sentiment Survey results:

  • Bullish: 27.9%, down 0.6 percentage points
  • Neutral: 32.9%, up 2.1 percentage points
  • Bearish: 39.3%, down 1.5 percentage points

Historical averages:

  • 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

 

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