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AAII Sentiment Survey: Optimism Slips Despite New Record Highs

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sentiment chart 07-21-16

The further ascent by the Dow Jones industrial average and the S&P 500 index into record territory did not translate into higher optimism among individual investors. The latest AAII Sentiment Survey shows bullish sentiment—as well as neutral sentiment—declining, and bearish sentiment rising. The changes were modest, however.

Bullish sentiment, expectations that stock prices will rise over the next six months, pulled back by 1.4 percentage points to 35.4%. Optimism is below its historical average of 38.5% for the 37th consecutive week and the 70th out of the past 72 weeks.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, slipped 0.9 percentage points to 37.9%. Nonetheless, neutral sentiment is above its historical average of 31.0% for the 25th consecutive week.

Bearish sentiment, expectations that stock prices will fall over the next six months, rebounded by 2.3 percentage points to 26.7%. Pessimism was last lower on since April 20, 2016 (23.9%). The historical average is 30.5%.

While optimism among individual investors remains below average, it has still shown recent signs of improvement, with bullish sentiment above 30% for the third consecutive week. To put this into perspective, optimism has only stayed above 30% for a span of three consecutive weeks just one other time this year (February 24 through March 9).

A lack of perceived viable investment alternatives, economic growth and upward momentum in stock prices is encouraging some individual investors about the short-term direction of stock prices. 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: 35.4%, down 1.4 percentage points
  • Neutral: 37.9%, down 0.9 percentage points
  • Bearish: 26.7%, up 2.3 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.).

Want to weigh in? Take the survey yourself and see results online at http://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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