Optimism among individual investors about the short-term direction of the stock market is above 40% for a fourth consecutive week for the first time in approximately two years. This week’s AAII Sentiment Survey also shows a decline in neutral sentiment and a modest rise in pessimism.
Bullish sentiment, expectations that stock prices will rise over the next six months, declined 0.7 percentage points to 43.1%. This marks the fourth consecutive week that optimism is above 40% and the fifth consecutive week that it is above its historical average of 38.5%.
Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, declined 0.7 percentage points to 30.4%. The modest decrease puts neutral sentiment back below its historical average of 31.0%.
Bearish sentiment, expectations that stock prices will fall over the next six months, rose 1.4 percentage points to 26.5%. Even with the increase, pessimism is below its historical average of 30.5% for a fifth consecutive week.
Bullish sentiment readings in the low- to mid-40s have been a normal occurrence throughout the history of survey. During most of the past 24 months, however, readings above 40% have been fairly rare. For example, the last time optimism held above 40% on four consecutive weeks was December 25, 2014 through January 15, 2015. In total, there have only been 14 weeks over the past 24 months with optimism at or above 40%.
Though the new record highs are giving individual investors encouragement, or at least calming fears about a drop occurring in the short term, the election’s outcome remains front and center for many AAII members. Some are encouraged by possible changes President-elect Donald Trump could make, while others are uncertain or want to wait to see how his administration’s policies and their impact evolve. There are also individual investors who are pessimistic following the election. Beyond the election, the direction of interest rates, the pace of economic and earnings growth, and valuations are influencing individual investors’ expectations for the stock market.
This week’s AAII Sentiment Survey results:
- Bullish: 43.1%, down 0.7 percentage points
- Neutral: 30.4%, down 0.7 percentage points
- Bearish: 26.5%, up 1.4 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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