AAII Sentiment Survey: Bulls are Back

Bullish sentiment, expectations that stock prices will rise over the next six months, mproved 4.1 percentage points to 41.8% in the latest AAII Sentiment Survey. This is the first time optimism that stock prices will rise over the next six months has been above its historical average of 39% since February 17, 2011.

Neutral sentiment, expectations that stock prices will stay essentially flat over the next six months, was down a very modest 0.2 percentage points at 27.1%. The historical average is 31%.

Bearish sentiment, expectations that stock prices will fall over the next six months, declined 3.9 percentage points to 31.1%. This is a six-week low for pessimism. The historical average is 30%.

The S&P 500’s rebound over the past seven days has renewed investors’ optimism about the direction of stock prices. It is a cautious optimism, however, with bearish sentiment staying above its historical average for sixth consecutive week.

This week’s special question asked AAII members at what point rising oil prices would have them worried about a potential slowing of economic growth. The majority of respondents fell into one of three groups. The first thought oil was already having a negative impact. The second said if crude stayed at $120 per barrel or higher, economic growth would be curtailed. The third said oil would have to rise above the $140 – $150 per barrel range to make them worried.

Here is a sampling of what AAII members said:

  • “I am somewhat concerned at these levels; oil at $125 per barrel or more would turn my concern into real worry.”
  • “A price per barrel above $120 for a significant period of time would worry me and force me to re-examine my entire portfolio.”
  • “I think the more common barometer is the price of a gallon of gas. I believe the breaking point is $4.”
  • “At current levels, I am not concerned. If oil got to $140 per barrel, then I think it would be a headwind. Also, if the price of gas rose above $4 a gallon.”
  • “The current price of oil will slow growth as it impacts discretionary spending by consumers. Automobiles do not run on iPads.”

This week’s AAII Sentiment Survey results

  • Bullish: 41.8%, up 4.1 percentage points
  • Neutral: 27.1%, down 0.2 percentage points
  • Bearish: 31.1%, down 3.9 percentage point

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