AAII Sentiment Survey: Bulls Keep Charging Forward

Bullish sentiment, expectations that stock prices will rise over the next six months, declined 2.8 percentage points, to 41.9%. Nonetheless, this was the first time optimism has stayed above 40% for four consecutive weeks since February 2011. The historical average is 39%. Bullish sentiment stayed above 40% for the fourth consecutive week.

Neutral sentiment, expectations that stock prices will stay essentially flat over the next six months, fell 3.7 percentage points to 27.0%. This is the 17th time in the past 18 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, rebounded by 6.5 percentage points to 31.0%. This was the first time in four weeks that pessimism has been above its historical average of 30%.

AAII members continue to be more upbeat about the six-month direction of stocks prices than they were in August and September. Optimism remains cautious, however, as is evidenced by the bullish sentiment reading. The slow level of U.S. economic growth, Europe’s sovereign debt crisis, Washington politics and the market’s daily volatility are combining to keep confidence at historically modest modest levels, and the nerves of some individual investors are frayed.

This week’s special question asked AAII members what sectors and industries they currently like. Oil and technology tied as the favorites. Health care and utilities tied for second, followed by consumer staples. When the same question was asked in August, members said they liked energy (NYSE:XLE), basic materials/commodities (NYSE:XLB), health care (NYSE:XLV), utilities (NYSE:XLU) and technology (NYSEARCA:XLK).

This week’s AAII Sentiment Survey results:

  • Bullish: 41.9%, down 2.8 percentage points
  • Neutral: 27.0%, down 3.7 percentage points
  • Bearish: 31.0%, up 6.5 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