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AAII Sentiment Survey: Optimism Rises Back Above 50%

Optimism among individual investors about the short-term direction of stocks is back above 50%. The latest AAII Sentiment Survey also shows declines in neutral and bearish sentiment.

Bullish sentiment, expectations that stock prices will rise over the next six months, rebounded by 5.4 percentage points to 54.1%. The rise puts optimism above 50% for the fourth time in five weeks. The historical average is 38.5%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, declined by 1.8 percentage points to 24.5%. Neutral sentiment is below its historical average of 31.0% for a seventh consecutive week.

Bearish sentiment, expectations that stock prices will fall over the next six months, pulled back by 3.7 percentage points to 21.4%. The drop puts pessimism near the lower end of its typical historical range. The historical average is 30.5%.

Bullish sentiment is above its historical average for the sixth consecutive week. This is the longest such streak since a 10-week stretch following the 2016 elections. During the current streak, optimism has averaged 51.8%.

Historically, the S&P 500 index has realized below-average and below-median returns over the six- and 12-month periods following unusually high bullish sentiment readings. A table with the historical data can be found on our website.

Some individual investors are encouraged by the record highs for the major indexes, the tax cuts and/or the Federal Reserve’s decision to continue raising interest rates at a gradual pace. Other individual investors are concerned about the possibility of a pullback or a more severe drop occurring. Even many investors who are optimistic about the overall direction of stocks expect a return of volatility this year. Also affecting investor sentiment are earnings growth, economic growth, valuations and the lack of volatility. Washington politics remain at the forefront of many individual investors’ minds.

This week’s AAII Sentiment Survey results:

  • Bullish: 54.1%, up 5.4 percentage points
  • Neutral: 24.5%, down 1.8 percentage points
  • Bearish: 21.4%, down 3.7 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.). The survey and its results are available online at: www.aaii.com/sentimentsurvey.

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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