Optimism among individual investors about the short-term direction of the stock market rebounded to a four-week high in the latest AAII Sentiment Survey. Neutral and bearish sentiment both declined, but remain above their respective historical averages.
Bullish sentiment, expectations that stock prices will rise over the next six months, rose 6.9 percentage points to 28.9%. This is the ninth time in 10 weeks that fewer than three out of 10 survey respondents are optimistic. It is also the 34th consecutive week and the 67th out of the past 69 weeks with bullish sentiment below its historical average of 38.5%.
Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, fell 5.1 percentage points to 37.7%. The drop nearly negates last week’s rise. Even with the decrease, neutral sentiment remains above its historical average of 31.0% for the 22nd consecutive week.
Bearish sentiment, expectations that stock prices will fall over the next six months, declined 1.8 percentage points to 33.4%. This is the third consecutive week pessimism is above its historical average of 30.5%.
Though optimism did rebound strongly this week, it is only barely within the range of typical readings. The rebound from Friday’s and Monday’s market drop helped boost bullish sentiment, though AAII members are already pointing to the uncertainty created by Brexit, as is observed in the responses to this week’s special question. There was also likely some reversion to the mean given last week’s unusually low reading for bullish sentiment. The longer-term trend of low optimism remains intact, with bullish sentiment only exceeding 30% seven times this year.
Giving individual investors cause for concern is the slow pace of U.S. economic growth and uncertain pace of global economic growth, terrorism and global unrest, lackluster corporate earnings, the prevailing level of valuations, the forthcoming November elections, monetary policy and Brexit. Some AAII members, however, are encouraged by sustained domestic economic growth, corporate earnings and the proximity of stock prices to their record highs.
This week’s AAII Sentiment Survey results:
- Bullish: 28.9%, up 6.9 percentage points
- Neutral: 37.7%, down 5.1 percentage points
- Bearish: 33.4%, down 1.8 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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