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AAII Sentiment Survey: Pessimism Rebounds, Neutral Sentiment Stays High

Pessimism about the short-term direction of stock prices rebounded to a six-week high in the latest AAII Sentiment Survey. At the same time, neutral sentiment stayed above 40%, while optimism was nearly unchanged.

Bullish sentiment, expectations that stock prices will rise over the next six months, declined by a mere 0.1 percentage points to 29.6%. This is the 19th consecutive week and the 24th time out of the last 25 weeks that optimism is below its historical average of 38.5%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, pulled back by 2.9 percentage points to 40.6%. Neutral sentiment remains above its historical average of 31.0% for the 10th consecutive week and the 15th out of the last 16 weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, rebounded by 3.0 percentage points to 29.9%. Pessimism was last higher on May 31, 2017 (31.5%). The rebound was not large enough to prevent bearish sentiment from staying below its historical average of 30.5% for the eighth time out of the last 10 weeks.

Neutral sentiment is above 40% on back-to-back weeks for the first time since October 26 and November 2, 2016. Even with this week’s decline, neutral sentiment remains at an unusually high level (more than one standard deviation above its historical average.)

This year’s record highs for the S&P 500 and the Nasdaq have encouraged some individual investors, though any impact of the latter index’s recent weakness has not been expressed by our members. The Trump administration’s ability (or lack thereof) to move forward on economic and tax policy remains at the forefront of many others’ minds and is having a significant impact on sentiment. Also playing roles are earnings, valuations, concerns about the possibility of a pullback in stock prices and interest rates/monetary policy.

This week’s AAII Sentiment Survey results:

  • Bullish: 29.6%, down 0.1 percentage points
  • Neutral: 40.6%, down 2.9 percentage points
  • Bearish: 29.9%, up 3.0 percentage points

Historical averages:

  • Bullish: 38.5%
  • Neutral: 31.0%
  • 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.).

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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