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AAII Sentiment Survey: Optimism Rebounds as Pessimism Falls

Optimism among individual investors about the short-term direction of the stock market rebounded to its highest level since February in the latest AAII Sentiment Survey. At the same time, pessimism fell after having reached an unusually high level last week.

Bullish sentiment, expectations that stock prices will rise over the next six months, rose 11.7 percentage points to 37.8%. This is an eight-week high. The increase was not large enough to prevent optimism from staying below its historical average of 38.5% for an eighth consecutive week and the ninth time in 11 weeks.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rose 1.8 percentage points to 33.0%. Neutral sentiment is above its historical average of 31.0% for the ninth consecutive week.

Bearish sentiment, expectations that stock prices will fall over the next six months, plunged 13.5 percentage points to 29.2%. The drop puts pessimism below its historical average of 30.5% for the first time in four weeks.

There was a reversion to the mean this week after last week’s spike in pessimism to its highest level in more than a year. The possibility of negotiations over trade and the rebound in stock prices likely had an effect.

Responses to our weekly special question indicate that many individual investors, but not all, are continuing to 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. While many individual investors either approve of the recent interest rate hike or don’t expect it to affect the stock market, some are concerned about the impact that rising rates will have. Also influencing sentiment are valuations, tax cuts, earnings and economic growth.

This week’s AAII Sentiment Survey results:

  • Bullish: 37.8%, up 11.7 percentage points
  • Neutral: 33.0%, up 1.8 percentage points
  • Bearish: 29.2%, down 13.5 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.

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