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AAII Sentiment Survey: Pessimism Pulls Back

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The level of pessimism along individual investors has pulled back, though it still remains above average, according to the latest AAII Sentiment Survey. Neutral sentiment rebounded, while optimism was fractionally lower.

Bullish sentiment, expectations that stock prices will rise over the next six months, was nearly unchanged, decreasing by just 0.1 percentage points to 32.4%. The modest decline keeps optimism below its historical average of 39.0% for the 26th 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, rebounded by 6.7 percentage points to 35.9%. The increase put neutral sentiment back above its historical average of 31.0%.

Bearish sentiment, expectations that stock prices will fall over the next six months, retreated by 6.6 percentage points to 31.7%. Though at a six-week low, pessimism remains above its historical average of 30.0% for a sixth consecutive week. This is the longest streak of consecutive above-average readings for bearish sentiment since a 16-week stretch between August 30 and December 13, 2012.

Reaction by individual investors to the volatility experienced by the stock market over the past two weeks has been mixed, as this week’s sentiment readings and the responses to this week’s special question indicate. The fact that the major U.S. indexes have not retested their recent lows also likely helped alleviate some of the pessimism registered in last week’s survey results.

This week’s AAII Sentiment Survey

  • Bullish: 32.4%, down 0.1 percentage points
  • Neutral: 35.9%, up 6.7 percentage points
  • Bearish: 31.7%, down 6.6 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.). The survey and its results are available online at: http://www.aaii.com/sentimentsurvey.

 

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