The percentage of individual investors describing their short-term outlook for stocks as “neutral” is at its highest level in two months, according to the latest AAII Sentiment Survey. At the same time, optimism is back below 30%. Pessimism is lower as well.
Bullish sentiment, expectations that stock prices will rise over the next six months, declined 1.5 percentage points to 29.8%. Optimism was last lower on June 29, 2016 (28.9%). This is the 39th consecutive week and the 72nd out of the past 74 weeks with a bullish sentiment reading below its historical average of 38.5%.
Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rose 3.1 percentage points to 43.4%. Neutral sentiment was last higher on June 8, 2016 (44.3%). This week’s increase keeps neutral sentiment above its historical average of 31.0% for the 27th consecutive week.
Bearish sentiment, expectations that stock prices will fall over the next six months, declined 1.6 percentage points to 26.8%. The decrease keeps pessimism below its historical average of 30.5% for the fifth consecutive week.
Neutral sentiment is back at an unusually high level. At the same time, fewer than 30% of individual investors describe their short-term outlook as “bullish,” for the first time since the end of June. Concerns about valuations and the presidential election are having an impact, as well as headlines about the Dow Jones industrial average’s recent seven-day drop.
In addition to prevailing valuations and the election, global economic uncertainty (including Brexit) and disappointment with corporate earnings growth are giving some individual investors reasons to be cautious or pessimistic. Others feel that the perceived lack of viable investment alternatives, economic growth and generally upward momentum in stock prices will result in higher stock prices over the next six months.
This week’s AAII Sentiment Survey results:
- Bullish: 29.8%, down 1.5 percentage points
- Neutral: 43.4%, up 3.1 percentage points
- Bearish: 26.8%, down 1.6 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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