AAII Sentiment Survey: How Do Investors Feel About 2013?

Optimism rebounded strongly, as pessimism dropped in the latest AAII Sentiment Survey.

Bullish sentiment, expectations that stock prices will rise over the next six months, jumped 7.7 percentage points to 46.4%. This matches the short-term high set on December 20, 2012. Bullish sentiment is also above its historical average of 39% for the sixth time in seven weeks.

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Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, increased 1.5 percentage points to 26.6%. Even with the improvement, neutral sentiment is below its historical average of 30.5% for the 13th consecutive week.

Bearish sentiment, expectations that stock prices will fall over the next six months, fell 9.3 percentage points to 26.9%. Though the magnitude of the increase is steep, it only puts pessimism at a three-week low. Bearish sentiment is also below its historical average of 30.5% for the fourth time in five weeks.

At current levels…

both bullish and bearish sentiment are within their typical historical ranges.

The resolution to the tax policy portion of the fiscal cliff has removed some of the uncertainty that individual investors were facing. Higher stock prices, monetary stimulus, continued economic growth, seasonality and a lack of negative headlines are also playing a role.

This week’s AAII Sentiment Survey results:

· Bullish: 46.4%, up 7.7 percentage points

· Neutral: 26.6%, up 1.5 percentage points

· Bearish: 26.9%, down 9.3 percentage points

Historical averages:

· Bullish: 39.0%

· Neutral: 30.5%

· Bearish: 30.5%

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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