Pessimism among individual investors about the short-term direction of the stock market fell to its second-lowest level of the year as optimism rebounded to a 11-week high. The latest AAII Sentiment Survey also shows neutral sentiment falling below 40% for the first time in four weeks.
Bullish sentiment, expectations that stock prices will rise over the next six months, jumped 7.2 percentage points to 35.5%. Optimism was last higher on May 3, 2017 (38.1%). Even with this week’s large increase, bullish sentiment remains below its historical average of 38.5% for the 21st consecutive week and the 26th time out of the last 27 weeks.
Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, fell 3.4 percentage points. Nonetheless, neutral sentiment remains above its historical average of 31.0% for the 12th consecutive week and the 17th out of the last 18 weeks.
Bearish sentiment, expectations that stock prices will fall over the next six months, fell 3.8 percentage points to 25.8%. Pessimism was last lower on January 4, 2017 (25.2%). The drop keeps pessimism below its historical average of 30.5% for the 10th time out of the last 12 weeks.
This year’s trend of below-average levels of optimism continues. Since the start of 2017, bullish sentiment has only matched or exceeded its historical average three times (January 4, January 11 and February 22.) The rebound in optimism that took place this week occurred as both large-cap and small-cap indexes rose to new record highs. The rebound also followed what had nearly been an unusually low reading in bullish sentiment last week.
While some individual investors are encouraged by this year’s record highs for the major indexes, others fret about the prevailing level of valuations. The Trump administration’s ability (or lack thereof) to move forward on economic and tax policy remains at the forefront of many investors’ minds and is having a significant impact on sentiment. Other factors playing roles are earnings, concerns about the possibility of a pullback in stock prices and interest rates/monetary policy.
This week’s AAII Sentiment Survey results:
- Bullish: 35.5%, up 7.2 percentage points
- Neutral: 38.7%, down 3.4 percentage points
- Bearish: 25.8%, down 3.8 percentage points
- 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.
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