Neutral sentiment jumped above 40 percent as optimism fell in the latest AAII Sentiment Survey. The increase puts neutral sentiment above its historical average for the 24th consecutive week. The last time we saw a similar streak was in 1999 (January 28 through July 8).
Bullish sentiment, expectations that stock prices will rise over the next six months, fell 9.5 percentage points to 35.2 percent. This large drop follows a three-week cumulative rise of 14.3 percentage points. It also puts optimism back below its historical average of 39 percent for the first time in three weeks.
Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rebounded by 6.6 percentage points to 40.7 percent. This is a four-week high. As noted above, neutral sentiment is now above its historical average of 30.5 percent for the 24th consecutive week.
Bearish sentiment, expectations that stock prices will fall over the next six months, rose 2.9 percentage points to 24.1 percent. The rebound puts pessimism at a four-week high. The move was not big enough to keep bearish sentiment from being below its historical average of 30.5 percent for the ninth straight week, however.
Neutral sentiment is back up to an unusually high level (one standard deviation above its historical average). As I discuss in this month’s AAII Journal, the S&P 500 has realized above-average six- and 12-month gains following unusually high neutral sentiment readings.