AAII Sentiment Survey: Bullish Sentiment Above Average for 15th Week

Bullish sentiment, expectations that stocks prices will rise over the next six months, stayed above its historical average for the 15th consecutive week in the latest AAII Sentiment Survey. Optimism registered 50.2%, a 2.8 percentage-point dip from the previous week.

Neutral sentiment, expectations that stock prices will remain essentially unchanged over the next six months, declined 1.8 percentage points to 22.6%. This was the 19th consecutive week that neutral sentiment has been below its historical average of 31%.

Bearish sentiment, expectations that stock prices will fall over the next six months, rose 4.6 percentage points to 27.1%. Though this is a four-week high for pessimism, bearish sentiment remains within the range we have seen since beginning of October. The historical average is 30%.

By several measures, bullish sentiment is running hot. These measures include the current reading, the number of weeks above its historical average and the eight-week moving average. However, optimism was hotter in 2004, the last time we saw a long streak of above average bullish sentiment. Thus, while bullish sentiment is hot enough to take notice, there have been past periods when it has run even hotter.

This week’s special question asked AAII members what type of stocks they are looking at right now: value, growth or dividend-paying? More than half of the respondents said they favor dividend stocks. Value was second. Some respondents indicated, however, that they use a combination of styles, such as dividend-paying value stocks. The majority of our members are either nearing retirement or are in retirement, so age does have an influence on the results.

Here is a sampling of the responses:

“Dividend-paying because they tend to offer a more stable investment and are better positioned to weather volatile market conditions.”

“Dividend-paying stocks; bonds are providing insufficient income.”

“Dividends, because interest rates stink thanks to Bountiful Ben [Fed Chairman Ben Bernanke].”

“Value. Still a few bargains out there, but not many.”

“Value plus dividend-paying. I am looking for bargains in quality companies in an uncertain economy and am looking for better-than-bank-CD rates on dividend returns.”

This week’s Sentiment Survey results:

Bullish: 50.2%, down 2.8 percentage points
Neutral: 22.6%, down 1.8 percentage points
Bearish: 27.1%, up 4.6 percentage points

Historical averages:

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

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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