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AAII Sentiment Survey: Pessimism Rebounds

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Pessimism among individual investors about stock prices dropping rebounded in the latest AAII Sentiment Survey. The rise in bearish sentiment occurred as both bullish sentiment and neutral sentiment fell.

Bullish sentiment, expectations that stock prices will rise over the next six months, fell 3.3 percentage points to 25.5%. The drop puts optimism below its historical average of 38.5% for the 49th consecutive week and the 82nd out of the past 84 weeks.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, pulled back by 2.5 percentage points to 40.8%. Even with the drop, neutral sentiment remains above its historical average of 31.0% for the 37th consecutive week.

Bearish sentiment, expectations that stock prices will fall over the next six months, rose 5.8 percentage points to 33.7%. The increase puts pessimism above its historical average of 30.5% for the fifth time in seven weeks.

Pessimism has largely stayed above its historical average since the end of August. Though higher than the levels seen in July and most of August, pessimism has stayed within its typical historical range. Optimism is currently at an unusually low level, and has been for four out of the past five weeks.

Causing concern for some investors is the possibility of the stock market experiencing a larger drop than what occurred in mid-September, valuations, the November elections, global economic uncertainty and the pace of corporate earnings growth. Giving other individual investors reason for optimism are the perceived lack of investment alternatives, corporate earnings, low/stable energy prices and sustained, albeit slow, economic growth.

This week’s AAII Sentiment Survey results:

  • Bullish: 25.5%, down 3.3 percentage points
  • Neutral: 40.8%, down 2.5 percentage points
  • Bearish: 33.7%, up 5.8 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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