The proportion of individual investors expecting stock prices to weaken topped 30% for the first time in three months. At the same time, optimism fell to its lowest level since early October.
Bullish sentiment, expectations that stock prices will rise over the next six months, plunged by 9.0 percentage points to 37.1%. Optimism was last lower on October 2, 2014 (35.4%). This is just the third time in the past 24 weeks that bullish sentiment is below its historical average of 39.0%.
Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, declined by 0.3 percentage points to 32.1%. This is the third consecutive week and the sixth out of the past eight with a neutral sentiment reading above the historical average of 30.5%.
Bearish sentiment, expectations that stock prices will fall over the next six months, spiked by 9.3 percentage points to 30.8%. This is the largest amount of pessimism recorded by our survey since October 16, 2014 (33.7%). The rise ends a streak of 13 consecutive weeks with bearish sentiment below its historical average of 30.5%.
This week’s readings signal that a reversion to the mean has occurred. Optimism has rescinded from the unusually high level registered a few weeks ago, while bearish sentiment has rebounded from an unusually low level. This shift has occurred as the S&P 500 is modestly lower for the month (down 1.3% as of yesterday’s close) following the previous record highs.
Keeping AAII members encouraged is the overall upward momentum of stock prices, falling energy prices, earnings growth and sustained economic expansion. Causing other members to be cautious or pessimistic are geopolitical events, the impact of falling oil prices on energy stocks, a sense that prevailing valuations for stocks are too high, the pace of economic growth and worries that an even larger decline in stock prices could occur.
This week’s AAII Sentiment Survey results:
- Bullish: 37.1%, down 9.0 percentage points
- Neutral: 32.1%, down 0.3 percentage points
- Bearish: 30.8%, up 9.3 percentage points
- Bullish: 39.0%
- Neutral: 30.5%
- 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.