Pessimism among individual investors jumped to a two-month high in the latest AAII Sentiment Survey. Neutral sentiment also rose, while optimism fell.
Bullish sentiment, expectations that stock prices will rise over the next six months, plunged 15.8 percentage points to 29.3%. Optimism was last at this level on September 6, 2017. This is the first time in four weeks that bullish sentiment is below its historical average of 38.5%.
Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rose 3.6 percentage points to 35.4%. The historical average is 31.0%.
Bearish sentiment, expectations that stock prices will fall over the next six months, rebounded by 12.1 percentage points to 35.2%. Pessimism was last higher on September 6, 2017 (35.7%). The historical average is 30.5%.
At current levels, all three sentiment indicators are within their historical ranges. Bullish sentiment, however, is near the low end of its typical range.
The big rise in pessimism follows recent declines in the major large-cap and small-cap indexes. Many AAII members have previously expressed concerns about the possibility of a pullback or a more severe drop occurring. Tax reform could also be playing a role. While some of our members are optimistic about the prospects of tax reform being passed, about 40% of members polled in a different weekly AAII survey said the proposed legislation could hurt them.
Also having an effect on investor sentiment are earnings growth, economic growth and/or the market’s overall upward momentum (all cited as reasons for optimism). Other individual investors view stocks as being a bit too overpriced or are concerned about the lack of volatility. Political drama in Washington also continues to be at the forefront of many individual investors’ minds.
This week’s AAII Sentiment Survey results:
- Bullish: 29.3%, down 15.8 percentage points
- Neutral: 35.4%, up 3.6 percentage points
- Bearish: 35.2%, up 12.1 percentage points
- 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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