Pessimism fell to an eight-week low, ending a streak of seven consecutive weeks with above-average readings, in the latest AAII Sentiment Survey. Neutral sentiment rebounded, while optimism declined modestly.
Bullish sentiment, expectations that stock prices will rise over the next six months, pulled back by 1.4 percentage points to 33.3%. The decline keeps bullish sentiment below its historical average of 39.0% for the 28th consecutive week, the longest such streak since a 29-week stretch in 1993.
Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, jumped 7.3 percentage points to 37.6%. The rebound puts neutral sentiment back above its historical average of 31.0%.
Bearish sentiment, expectations that stock prices will fall over the next six months, fell 5.9 percentage points to 29.1%. This is the lowest level of pessimism registered by our survey since July 23, 2015 (25.6%). The historical average is 30.0%.
Rising stock prices over the survey period combined with a decrease in market volatility helped to lessen some of the pessimism registered in our survey. This said, it is too early to say whether this week’s results imply a shift in attitudes or just a one-week change. Though some individual investors were encouraged by the decline in valuations that occurred in late August, others remain concerned about the possibility of stock prices falling further due to valuations, slow earnings growth and slow economic growth. It’s worth noting that bullish, neutral and bearish sentiment all remain within their typical historical ranges.
This week’s AAII Sentiment Survey results:
• Bullish: 33.3%, down 1.4 percentage points
• Neutral: 37.6%, up 7.3 percentage points
• Bearish: 29.1%, down 5.9 percentage points
• Bullish: 39.0%
• Neutral: 31.0%
• Bearish: 30.0%
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.