AAII Sentiment Survey: Optimism Above Average

Bullish sentiment is above average for the fourth consecutive week, while bearish sentiment rebounded in the latest AAII Sentiment Survey.

Bullish sentiment, expectations that stock prices will rise over the next six months, declined 1.9 percentage points to 47.2%. Even with the drop, bullish sentiment is above its historical average of 39% for the fourth consecutive week and the 10th time out of the last 15 weeks.

Neutral sentiment, expectations that stock prices will stay essentially flat over the next six months, fell 4.5 percentage points to 29.2%. This is the first time in three weeks that neutral sentiment is below its historical average of 31%.

Bearish sentiment, expectations that stock prices will fall over the next six months, rose 6.4 percentage points to 23.6%. Although this is a three-week high, pessimism is below its historical average of 30% for the fourth time in the past five weeks.

Sentiment remains upbeat, as individual investors are hopeful about the short-term direction of prices. Even though many are optimistic, individual investors still remain concerned about the pace of economic growth, Washington politics and the European sovereign debt crisis.

This week’s special question asked AAII members if they are taking on more risk (investing more aggressively), less risk (investing more conservatively) or keeping their risk exposure about the same as six months ago. The largest number of respondents said they were keeping their risk exposure unchanged. Investing more conservatively and investing more aggressively ranked second and third in terms of the number of responses.

This week’s AAII Sentiment Survey results:

  • Bullish: 47.2%, down 1.9 percentage points
  • Neutral: 29.2%, down 4.5 percentage points
  • Bearish: 23.6%, up 6.4 percentage points

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