AAII Sentiment Survey: Pessimism Falls to An Unusually Low Level

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Pessimism about the short-term direction of stocks among individual investors fell to its lowest level in more than a year. The latest AAII Sentiment Survey also shows increases in optimism and neutral sentiment.

Bullish sentiment, expectations that stock prices will rise over the next six months, rose 2.3 percentage points to 41.6%. Optimism was last higher on October 3, 2018 (45.7%). This is the third time in four weeks that optimism is above its historical average of 38.5%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rebounded by 3.1 percentage points to 38.4%. Neutral sentiment remains above its historical average of 31.0% for the sixth time in eight weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, fell 5.4 percentage points to 20.0%. Pessimism was last lower on January 3, 2018 (15.6%). Bearish sentiment is below its historical average of 30.5% for the fourth consecutive week.

Pessimism is now at an unusually low level (more than one standard deviation below its historical average). Historically, the S&P 500 index has realized below-average and below-median returns during the six- and 12-month periods following such readings.

The ongoing rebound in stock prices has encouraged some individual investors, though others have concerns about its sustainability. Many individual investors are monitoring trade negotiations, and the tempering of tensions may be having an impact on sentiment. Also having an influence are Washington politics (including President Trump and Democratic control of the House of Representatives), corporate earnings, the Federal Reserve, valuations and concerns about the pace of economic growth.

This week’s AAII Sentiment Survey results:

  • Bullish: 41.6%, up 2.3 percentage points
  • Neutral: 38.4%, up 3.1 percentage points
  • Bearish: 20.0%, down 5.4 percentage points

Historical averages:

  • Bullish: 38.5%
  • Neutral: 31.0%
  • Bearish: 30.5%

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