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AAII Sentiment Survey: Pessimism Rises to a Two-Month High

sentiment chart 08-25-16

Pessimism among individual investors about the short-term direction of stock prices is at a two-month high in the latest AAII Sentiment Survey. Optimism fell to back below 30%, while neutral sentiment rebounded modestly.

Bullish sentiment, expectations that stock prices will rise over the next six months, plunged 6.1 percentage points to 29.4%. Optimism was last lower on June 29, 2016. This is the 75th week out of the past 77 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, rebounded by 2.9 percentage points to 40.9%. The rebound puts neutral sentiment above 40% for the fourth time in five weeks. It also keeps neutral sentiment above its historical average of 31.0% for the 30th consecutive week.

Bearish sentiment, expectations that stock prices will fall over the next six months, rose 3.3 percentage points to 29.6%. This is the highest reading of pessimism since June 29, 2016 (33.4%). The increase is not large enough to prevent bearish sentiment from staying below its historical average of 30.5% for the eighth consecutive week, however.

This week’s decline in optimism follows what had been a five-week high. Meanwhile, pessimism rose from what had been a five-week low. Though the major U.S. indexes were relatively unchanged over the past seven days, concerns above valuations and the presidential election continue to temper individual investors’ expectations. Also keeping some individual investors bearish or at least giving them reason to be cautious are global economic uncertainty and disappointment with corporate earnings growth. Giving other individual investors reason for optimism are this summer’s upward movement in stock prices, the perceived lack of investment alternatives, corporate earnings and sustained, albeit slow, economic growth.

This week’s AAII Sentiment Survey results:

  • Bullish: 29.4%, down 6.1 percentage points
  • Neutral: 40.9%, up 2.9 percentage points
  • Bearish: 29.6%, up 3.3 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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