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AAII Sentiment Survey: Pessimism Moves Closer to 50%

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sent survey 01-21-16Pessimism about the short-term outlook for stocks moved closer to 50% in the latest AAII Sentiment Survey. Optimism improved a little, while neutral sentiment plunged to a five-month low.

Bullish sentiment, expectations that stock prices will rise over the next six months, rose 3.6 percentage points to 21.5%. The improvement comes after optimism had fallen to what was nearly an 11-year low last week. Bullish sentiment has now been below 30% for eight consecutive weeks, and has stayed below its historical average of 39.0% for 44 out of the past 46 weeks.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, fell 6.8 percentage points to 29.8%. Neutral sentiment was last lower on August 27, 2015 (29.2%). The drop ends a streak of 18 consecutive weeks of readings above its historical average of 31.0%.

Bearish sentiment, expectations that stock prices will fall over the next six months, rose 3.2 percentage points to 48.7%. Pessimism was last higher on April 11, 2013 (54.5%). Bearish sentiment has been above its historical average of 30.0% during five out of the last six weeks.

The very high level of pessimism and the very low level of optimism reflects the rough month stocks have experienced so far. The S&P 500 remains in a correction while small-cap stocks are in a bear market. Also playing a role are concerns about the slowing pace of economic growth in China, escalating tensions in the Middle East and frustration with the pace of economic growth in the U.S.

This week’s bearish sentiment reading ranks among the 70 highest in the survey’s history. Even with the improvement, this week’s bullish sentiment ranks among the 60 lowest readings in the history of our survey. Unusually low levels of optimism have historically had a stronger association with above-average S&P 500 returns over the following six- and 12-month periods than unusually high levels of pessimism.

This week’s AAII Sentiment Survey results:

  • Bullish: 21.5%, up 3.6 percentage points
  • Neutral: 29.8%, down 6.8 percentage points
  • Bearish: 48.7%, up 3.2 percentage points

Historical averages:

  • 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.).

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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