Optimism among individual investors about the short-term direction of the stock market is at an unusually low level for the second time in three weeks. At the same time, the latest AAII Sentiment Survey shows neutral sentiment being back above 40%. Pessimism is also higher this week.
Bullish sentiment, expectations that stock prices will rise over the next six months, pulled back by 5.9 percentage points to 26.9%. The drop keeps optimism below its historical average of 38.5% for the 19th time out of the last 20 weeks.
Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rose 4.4 percentage points to 41.5%. The rise keeps neutral sentiment above its historical average of 31% for the fifth consecutive week and the 10th time in 11 weeks.
Bearish sentiment, expectations that stock prices will fall over the next six months, rose 1.5 percentage points to 31.5%. The historical average is 30.5%.
Optimism is at an unusually low level, as noted above, and neutral sentiment is at an unusually high level for the second time in three weeks. Unusually low bullish sentiment readings have historically been followed by above-average returns for the S&P 500 index over the following the six- and 12-month periods, though there is no guarantee that this trend will recur in the future.
This week’s AAII Sentiment Survey results:
- Bullish: 26.9%, down 5.9 percentage points
- Neutral: 41.5%, up 4.4 percentage points
- Bearish: 31.5%, up 1.5 percentage points
- 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.
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