Optimism among individual investors about the short-term direction of stock prices is at a level not seen in over four months, according to the latest AAII Sentiment Survey. Meanwhile, neutral sentiment and bearish sentiment both declined.
Bullish sentiment, expectations that stock prices will rise over the next six months, jumped 5.8 percentage points to 36.9%. Optimism was last higher on March 9, 2016 (37.4%). Even with this week’s increase, bullish sentiment remains below its historical average of 38.5% for the 36th consecutive week and the 69th out of the past 71 weeks.
Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, pulled back by 3.6 percentage points to 38.7%. Neutral sentiment is above its historical average of 31.0% for the 24th consecutive week.
Bearish sentiment, expectations that stock prices will fall over the next six months, declined 2.2 percentage points to 24.4%. Pessimism was last lower on since April 20, 2016 (23.9%). The historical average is 30.5%.
Since registering 22.0% on June 22, 2016, optimism has rebounded by 14.9 percentage points. Though it’s a big move, some context is needed. First, as noted above, bullish sentiment remains below average. Secondly, this is just the second time since last November that optimism has exceeded 30% on consecutive weeks. Bullish sentiment was above 30% during the three-week span of February 24 through March 9, 2016.
The rebound in stock prices and the new record highs set by the S&P 500 have had a positive impact on some individual investors. Others are encouraged by the sustained economic growth. A view that there is there is no good alternative to stocks is contributing to the optimism. Giving reason for caution or pessimism is global economic uncertainty (including Brexit), the prevailing level of valuations and disappointment with corporate earnings growth. The presidential election and monetary policy are also impacting individual investor sentiment.
This week’s AAII Sentiment Survey results:
- Bullish: 36.9%, up 5.8 percentage points
- Neutral: 38.7%, down 3.6 percentage points
- Bearish: 24.4%, down 2.2 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.). The survey and its results are available online at: http://www.aaii.com/sentimentsurvey.
Want to weigh in? Take the survey yourself and see results online at http://www.aaii.com/sentimentsurvey.
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