AAII Sentiment Survey: Despite Dip, Bullish Sentiment Stays High at 50.7%

Bullish sentiment declined 1.6 percentage points to 50.7% in the latest AAII Sentiment Survey. This is a five-week low for expectations that stock prices will rise over the next six months. Nonetheless, optimism remains more than one standard deviation above its historic average of 39%—a sign that it remains at high levels.

Neutral sentiment, expectations that stock prices will remain essentially flat over the next six months, fell 4.0 percentage points to 20.1%. This is a 10-week low. Neutral sentiment has been below its historical average of 31% for 24 consecutive weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, rose 5.7 percentage points to 29.1%. This is the highest level of pessimism since November 18, 2010. Despite the increase, bearish sentiment stayed below its historical average for the 17th time in the past 19 weeks.

Bullish sentiment stayed above its historical average for the 20th consecutive week, the second longest streak in the survey’s history. A record streak of 42 consecutive weeks occurred between May 29, 2003 and March 11, 2004. The S&P 500 did fall during the months after the above-average bullish sentiment streak ended, but the pullback was a modest, mid-single-digit percentage point drop.

As far as bearish sentiment rising, it may simply represent a reversion to the mean. Concerns about the economy and the federal deficit have not subsided, even if positive news headlines have most investors feeling more upbeat about the outlook for stocks. Plus, the streak of high bullish readings may have some individual investors concerned that optimism may be too high.

This week’s special question asked AAII members if their views on the economy have changed from what they were six months ago, particularly given recent data. The overwhelming majority of respondents said that no, their views have not changed.

Here is a sampling of the responses:

  • “No, the economy continues to improve at a slow, but steady pace.”
  • “No—I keep thinking a slow, hesitant, but undoubted recovery is underway.”
  • “No. Until there are enough well-paying jobs created for the unemployed and new job market entrants, my view will not change.”
  • “Yes, overall I see progress, but I’m very concerned about the price of gas shutting all that down.”
  • “I would say the economy looks better than it did six months ago.”

This week’s AAII Sentiment Survey results

  • Bullish: 50.7%, down 1.6 percentage points
  • Neutral: 20.2%, down 4.0 percentage points
  • Bearish: 29.1%, up 5.7 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

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