AAII Sentiment Survey: Bullish Sentiment Hits 49.6%, A Five-Week High

Optimism among individual investors reached a five-week high in the latest AAII Sentiment Survey. Bullish sentiment, expectations that stock prices will rise over the next six months, rose 2.5 percentage points to 49.6%. This is the seventh consecutive week that bullish sentiment has been above its historical average of 39%.

Neutral sentiment, expectations that stock prices will remain essentially flat over the next six months, fell 0.9 percentage points to 25.2%. This is the 15th time in 16 weeks that neutral sentiment has been below its historical average of 31%.

Bearish sentiment, expectations that stock prices will fall over the next six months, declined 1.6 percentage points to 25.2%. This is the lowest level of pessimism in five weeks. It is also the fifth time in six weeks that bearish sentiment has been below its historical average of 30%.

Though bullish sentiment is at a five-week high and bearish sentiment is at a five-week low, neither reading suggests individual investors have become too optimistic about the short-term outlook for stocks. This can be seen in the bull-bear spread, which is at 24.4. Throughout the history of the survey, we have seen the spread rise above 40 (high levels of optimism) and fall below -30 (high levels of pessimism).

What the results do show is that individual investors remain hopeful about the short-term direction of the stock markets. This fall’s rebound has individual investors optimistic about the direction of stock prices, though many still have concerns about the economy, interest rates and the federal deficit.

This week’s special question asked AAII members whether the possibility that the Federal Reserve could provide more stimulus is influencing their investing decisions. The responses were evenly split between those who said it would not have any impact and those who said it would. Some respondents thought additional quantitative easing would not have much of an economic impact, whereas others expressed concerned about bond yields. A few respondents said they were buying gold and commodity ETFs in response to prospects of further fiscal stimulus.

Here is a sampling of the responses:

“Yes. I need to earn money from my portfolio and interest rates are so low that they force one to increase stock allocations to more than a comfortable level.”

“Yes. I am concerned about the impact it will have on interest rates.”

“Yes. Due to the Fed’s monetary stimulus, I am personally buying commodity ETFs.”

“No. The Fed’s actions over the past year haven’t done much to improve the overall U.S. economy.”

“Not really, however we need fiscal policies to change and get the economy moving forward.”

This week’s sentiment survey results:

Bullish: 49.6%, up 2.5 percentage points
Neutral: 25.2%, down 0.9 percentage points
Bearish: 25.2%, down 1.6 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