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AAII Sentiment Survey: Pessimism Pulls Back

Pessimism among individual investors about the short-term direction of stock prices pulled back from its five-month high. The latest AAII Sentiment Survey also shows a rebound in optimism.

Bullish sentiment, expectations that stock prices will rise over the next six months, rose 4.3 percentage points to 29.3%. This is the 28th consecutive week and the 33rd time out of the last 34 weeks that bullish sentiment is below its historical average of 38.5%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, declined a by mere 0.1 percentage points to 35.0%. Neutral sentiment remains above its historical average of 31.0% for the 19th consecutive week and the 24th time out of the last 25 weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, fell 4.2 percentage points to 35.7%. The drop follows what had been the second-highest reading of the year for pessimism. This is the sixth consecutive week with a bearish sentiment reading above its historical average of 30.5%.

Optimism rose from what had been an unusually low reading last week. At its current level, bullish sentiment is only back up to near the bottom of its typical range. Pessimism, conversely, receded from the top of its typical range.

Political drama in Washington, concerns about perceived high valuations and the possibility of a pullback are combining to dampen the short-term expectations for stock prices that are held by many individual investors. Some investors, however, are encouraged by continuing economic and earnings growth as well as the record highs set by the large-cap indexes this year.

This week’s special question asked AAII members what impact they expect this summer’s storms will have on the economy. Many of the respondents expect both a short-term negative impact from Harvey’s damage and a long-term positive impact from the rebuilding. Broken into overlapping groups, 43% of respondents expect economic growth to be hurt initially, while 38% expect growth to rebound over the longer term. An additional 22% think the storms will have limited or no impact.

This week’s AAII Sentiment Survey results:

  • Bullish: 29.3%, up 4.3 percentage points
  • Neutral: 35.0%, down 0.1 percentage points
  • Bearish: 35.7%, down 4.2 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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