AAII Sentiment Survey: Are the Bulls Back?

Bullish sentiment, expectations that stock prices will rise over the next six months, rose 2.7 percentage points to 35.2%. Even with the improvement, bullish sentiment remained below its historical average of 39% for the 11th consecutive week.

Neutral sentiment, expectations that stock prices will stay essentially flat over the next six months, fell 1.6 percentage points to 19.0%. This is the lowest level of neutral sentiment since November 11, 2010.

Bearish sentiment, expectations that stock prices will fall over the next six months, declined 1.1 percentage points to 45.7%. This was the eighth time in the past 10 weeks that bearish sentiment has been above 40%. It is also the 30th time out of the last 33 weeks that bearish sentiment has been above its historical average of 30%.

Individual investors continue to fret about the direction of stock prices. Concerns about the pace of economic growth, worries about European sovereign debt, frustration with Washington and volatile market conditions are combining to keep bearish sentiment at historically high levels.

This week’s special question asked AAII members where they foresee the U.S. economy headed over the next six months. The majority of respondents thought the economy would expand, albeit at a slow pace. A minority are expecting the U.S. to fall into a double-dip recession, while a few believe the pace of economic expansion will accelerate.

Here is a sampling of the responses:

  • “I expect continued slow growth until the fiscal uncertainties are clarified.”
  • “I suspect no growth on average, with minor ups and downs while the Congressional deadlock continues.”
  • “Slow growth that could morph into a double-dip recession if the European situation is not resolved.”
  • “I think we will have continued slow growth while Washington dithers.”
  • “Definitely slow to no growth, with a double-dip recession coming.”

This week’s AAII Sentiment Survey results:

  • Bullish: 35.2%, up 2.7 percentage points
  • Neutral: 19.0%, down 1.6 percentage points
  • Bearish: 45.7%, down 1.1 percentage points

Historical averages:

  • Bullish: 39%
  • Neutral: 31%
  • Bearish: 30%

Charles Rotblut is the author of the new book Better Good than Lucky: How Savvy Investors Create Fortune with the Risk-Reward Ratio. 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