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AAII Sentiment Survey: Pessimism Declines While Neutral and Bullish Sentiment Rise

Pessimism among individual investors fell from last week’s AAII Sentiment Survey, while bullish and neutral sentiment rose.

Bullish sentiment, expectations that stock prices will rose over the next six months, rose 1.2 percentage points, to 31.2%. Despite the slight increase, bullish sentiment remains below its historical average of 38.5% for the third week in a row.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rose 6.6 percentage points to 30.1%, bouncing back from a three-month low last week.

Bearish sentiment, expectations that stock prices will fall over the next six months, slid 7.8 percentage points to 38.7%. While a significant decline from last week, pessimism remains above its historical average for the fifth week in a row.

This week was the much-anticipated Federal Reserve announcement on whether interest rates would be held steady or raised. At the end of its two-day meeting, the Federal Reserve raised its target range on overnight rates by one quarter of a percentage point, bringing the range to 0.75% to 1.0%. The bank also projected that it will increase interest rates twice more this year. For investors that were concerned there would be more aggressive increases throughout 2017, this came as good news.

The central bank’s median projection for real gross domestic product during 2017 is 2.1%, unchanged from its December 2016 projection. Its median 2017 personal consumption expenditures (PCE) inflation expectation is 1.9% while the median inflation expectation is 4.5%; both figures are also unchanged from the December projection.

An article from The Wall Street Journal mentioned that this year’s rally insinuates that investors see the economy growing more rapidly than the Fed does, which could push up growth and inflation and push down unemployment more than the central banks believe.

This week’s AAII Sentiment Survey results:

  • Bullish: 31.2%, up 1.2 percentage points
  • Neutral: 30.1%, up 6.6 percentage points
  • Bearish: 38.7%, down 7.8 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: http://www.aaii.com/sentimentsurvey.

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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