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Optimism Surges and Pessimism Plunges

Optimism surged to a three-month high as pessimism plunged to a four-month low in the latest AAII Sentiment Survey. Neutral sentiment continues to stay at an unusually high level.

Bullish sentiment, expectations that stock prices will rise over the next six months, jumped 10.1 percentage points to 35.6%. Optimism was last higher on March 26, 2015 (38.4%). Even with the big increase, bullish sentiment remains below its historical average of 39% for the 16th consecutive week—the first such occurrence since a 20-week streak between April 5 and August 16, 2012.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rebounded by 2.5 percentage points to 42.8%. The rise keeps neutral sentiment above its historical average of 31.0% for the 25th consecutive week and at an unusually high level for a 12th consecutive week.

Bearish sentiment, expectations that stock prices will fall over the next six months, plunged 12.6 percentage points to 21.7%. The drop follows what had been a 10-month high and puts pessimism at its lowest level since February 26, 2015 (20.3%). The historical average is 30%.

The big rebound in optimism and large drop in pessimism comes as the major indexes have bounced off of their recent lows. It also follows a period of seven consecutive weeks with bullish sentiment staying below 30%, the longest such streak since early 2003.

This week’s reading puts pessimism below its historical average for the 20th time this year, or 20 out of the past 26 weeks. Bearish sentiment is near the lower level of its typical range, but is not currently at an unusually low level.

This week’s AAII Sentiment Survey results:

  • Bullish: 35.6%, up 10.1 percentage points
  • Neutral: 42.8%, up 2.5 percentage points
  • Bearish: 21.7%, down 12.6 percentage points

Historical averages:

  • Bullish: 39.0%
  • Neutral: 31.0%
  • Bearish: 30.0%

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.

 

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