Individual Investor Optimism Rises to Three-Week High

Posted on July 3, 2014 | AAII Survey

Optimism among individual investors about the short-term direction of stock prices is at a three-week high, according to the latest AAII Sentiment Survey. Pessimism also rose slightly, while neutral sentiment extended its streak of above-average readings.

Bullish sentiment, expectations that stock prices will rise over the next six months, rose 1.3 percentage points to 38.5%. Even with the improvement, optimism remains below its historical average of 39.0% for the 14th time in the past 16 weeks.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, declined 2.6 percentage points to 39.1%. This is the 26th consecutive week that neutral sentiment is above its historical average of 30.5%.

Bearish sentiment, expectations that stock prices will fall over the next six months, rose 1.3 percentage points to 22.4%. This is the 11th straight week and the 34th out of the last 38 weeks with pessimism below its historical average of 30.5%.

The slight increase in pessimism follows what was a six-month low in bearish sentiment. Neutral sentiment remains at high levels, though it is now just below the upper border of what we would we consider to be an unusually high reading (39.4%). Keeping some AAII members optimistic is sustained economic growth, the market’s upward trend, and the Federal Reserve’s tapering of bond purchases. Discouraging some AAII members is the pace of economic growth, prevailing valuations, events in Iraq and Ukraine, and frustration with Washington politics.

This week’s AAII Sentiment Survey:

  • Bullish: 38.5%, up 1.3 percentage points
  • Neutral: 39.1%, down 2.6 percentage points
  • Bearish: 22.4%, up 1.3 percentage points

Historical averages:

  • Bullish: 39.0%
  • Neutral: 30.5%
  • 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.). The survey and its results are available online at: http://www.aaii.com/sentimentsurvey.