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AAII Sentiment Survey: Seven-Month High for Pessimism

Pessimism about the short-term direction of stock prices is at its highest level in more than seven months according to the latest AAII Sentiment Survey. At the same time, neutral sentiment is lower.

Bullish sentiment, expectations that stock prices will rise over the next six months, is unchanged at 31.9%. Optimism remains below its historical average of 38.5% for the seventh time in nine weeks.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, declined 1.3 percentage points to 31.5%. Neutral sentiment was last lower on February 14, 2018 (30.1%). Nonetheless, neutral sentiment remains above its historical average of 31.0% for the seventh consecutive week.

Bearish sentiment, expectations that stock prices will fall over the next six months, rose 1.3 percentage points to 36.6%. Pessimism was last higher on August 31, 2017 (39.9%). This is the first time bearish sentiment is above its historical average of 30.5% on consecutive weeks since November 30, 2017, and December 17, 2017.

After falling to its second-lowest level of the year on March 14, pessimism has rebounded by a cumulative 15.3 percentage points. Over the same three-week period, neutral sentiment has fallen by a cumulative 10.4 percentage points.

At current levels, all three sentiment measures are within their typical historical ranges.

Many individual investors are anticipating continued volatility and/or think that the current political backdrop could have a further impact on the stock market. Trade policy is influencing some individual investors’ sentiment, but not all. While many individual investors either approve of the recent interest rate hike or don’t expect it to affect the stock market, some are concerned about the impact that rising rates will have. Also influencing sentiment are valuations, tax cuts, earnings and economic growth.

This week’s AAII Sentiment Survey results:

  • Bullish: 31.9%, no change
  • Neutral: 31.5%, down 1.3 percentage points
  • Bearish: 36.6%, up 1.3 percentage points

Historical averages:

  • Bullish: 38.5%
  • Neutral: 31.0%
  • Bearish: 30.5%

Want to weigh in? Take the survey yourself and see results online at www.aaii.com/sentimentsurvey.

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