AAII Sentiment Survey: Neutral Sentiment Highest in 6 Months

Bullish sentiment, is essentially unchanged in the latest AAII Sentiment Survey. Optimism that stock prices will rise over the next six months edged up 0.2 percentage points to 36.8%. This is the second consecutive week that bullish sentiment has been below its historical average of 39%.

Neutral sentiment, expectations that stock prices will be essentially unchanged over the next six months, rose 2.8 percentage points to 30.1%. This is the highest reading for neutral sentiment since August 12, 2010. Despite the increase, neutral sentiment remained below its historical average of 31% for the 30th consecutive week.

Bearish sentiment, expectations that stock prices will fall, slipped 3.0 percentage points to 33.2%. Despite the decline, pessimism stayed above its historical average of 30% for the second consecutive week.

Individual investors remained cautious about the short-term outlook for stocks. This is not surprising given the recent return of volatility to the stock market and higher oil prices. In addition, it is worth noting that there is underlying unease about the pace of the economic recovery, inflation and the federal deficit.

This week’s special question asked AAII members if they have made any changes to their portfolios because of the turmoil in the Middle East. The overwhelming majority of respondents said no, they had not. Some did say they bought energy stocks, while others indicated the market’s recent volatility was a bigger factor in their decisions.

Here is a sampling of what AAII members said:

  • “No, I have not made any changes. I only see only the oil/gas sector being affected by this in the short term by this.”
  • “No, but I expect to see an increase in volatility in the short run.”
  • “No changes, but I’ve become more apprehensive about the short-term outlook for stocks.”
  • “I’ve increased my exposure to oil. Oil always wins.”
  • “No changes. I’m nearing retirement, but am still a long-term investor.”

This week’s AAII Sentiment Survey results

  • Bullish: 36.8%, up 0.2 percentage points
  • Neutral: 30.1%, up 2.8 percentage points
  • Bearish: 33.2%, down 3.0 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