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AAII Sentiment Survey: Optimism Pulls Back, But Stays Above 40%

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The percentage of investors describing themselves as bullish pulled back to a five-week low in the latest AAII Sentiment Survey. At the same time, neutral sentiment rose to a five-week high. Pessimism rose as well.

Bullish sentiment, expectations that stock prices will rise over the next six months, pulled back by 2.6 percentage points to 43.6%. Optimism was last lower on December 7, 2015 (43.1%). Nonetheless, bullish sentiment is above 40% for a ninth consecutive week and above its historical average of 38.5% for a 10th consecutive week.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rose 0.8 percentage points to 29.4%. Neutral sentiment was last higher on December 7, 2016 (30.4%). Even with the increase, neutral sentiment remains below its historical average of 31.0% for the sixth consecutive week and the eighth time in nine weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, rebounded by 1.7 percentage points to 27.0%. The rise was not large enough to keep pessimism from staying below its historical average of 30.5% for the ninth time in 10 weeks.

This week’s shifts in sentiment are not significant enough to alter the trend that has existed since the week of the election. More than two out of five individual investors have an optimistic short-term outlook for stocks. It is a level of optimism we have not seen hold relatively steady since the approximate six-month period of August 2014 to March 2015. Though bullish sentiment is currently high compared to what was registered throughout most of 2016, bullish sentiment is within its typical historical range.

The potential impact that President-elect Donald Trump could have on the economy is encouraging some individual investors and creating uncertainty or concern among others. Also influencing investor sentiment are valuations, earnings, consumer sentiment and the magnitude and timing of future interest rates.

This week’s AAII Sentiment Survey results:

  • Bullish: 43.6%, down 2.6 percentage points
  • Neutral: 29.4%, up 0.8 percentage points
  • Bearish: 27.0%, up 1.7 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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