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AAII Sentiment Survey: Optimism Rebounds Strongly, Stays Below Average

Optimism among individual investors about the short-term direction of stock prices rebounded strongly but continues to stay below average. The latest AAII Sentiment Survey also shows drops in neutral and bearish sentiment.

Bullish sentiment, expectations that stock prices will rise over the next six months, jumped by 10.0 percentage points to 37.9%. Bullish sentiment was last higher on October 3, 2018 (45.7%). Even though this is a four-week high, optimism remains below its historical average of 38.5% for the fourth consecutive week and the seventh time in eight weeks.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, fell 3.4 percentage points to 27.6%. Neutral sentiment was last lower on January 31, 2018 (26.5%). This is just the third time in 37 weeks that neutral sentiment is below its historical average of 31.0%.

Bearish sentiment, expectations that stock prices will fall over the next six months, pulled back by 6.5 percentage points to 34.5%. Even with the decline, pessimism remains above its historical average of 30.5% for the seventh time in eight weeks.

This week’s rise in optimism follows last week’s unusually low bullish sentiment reading of 28.0%. Year to date, there have been four weeks when optimism has risen by 10 percentage points or more and five weeks when optimism has fallen by at least 10 percentage points.

At current levels, all three indicators are within their historical average ranges.

The majority of the responses to this week’s survey were recorded before Tuesday’s and Wednesday’s rise in stock prices. Our survey period runs from Thursday through Wednesday with reminder emails to take the survey sent to a rotating group of AAII members each Monday.

Some AAII members were anticipating a decline in stock prices prior to the recent downward volatility and, as the responses to this week’s special question shows, some—but not the majority—used the recent drop to buy stocks. Tariffs and the possibility of an escalating trade war remain front and center in the minds of many individual investors. Also influencing sentiment is Washington politics (including President Donald Trump), midterm elections, economic growth, valuations and corporate profits.

This week’s AAII Sentiment Survey results:

  • Bullish: 37.9%, up 10.0 percentage points
  • Neutral: 27.6%, down 3.4 percentage points
  • Bearish: 34.5%, down 6.5 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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