AAII Sentiment Survey: The Bulls are Back

Bullish sentiment, expectations that stocks prices will rise over the next six months, increased by 3.2 percentage points to 45.6%. This is the highest level of optimism since February 9, 2012. It is also the 12th consecutive week and the 13th out of the last 14 weeks that bullish sentiment has been above its historical average of 39%.

Neutral sentiment, expectations that stock prices will fall over the next six months, declined 1.4 percentage points to 27.2%. This is a 13-week low. It is also the sixth consecutive week that neutral sentiment has been below its historical average of 31%.

Bearish sentiment, expectations that stock prices will fall over the next six months, fell 1.8 percentage points to 27.2%. This is the 11th consecutive week and the 12th out of the last 13 weeks that bearish sentiment has been below its historical average of 30%.

The difference between bullish and bearish sentiment, the bull-bear spread, is 18.4 percentage points. This the 11th consecutive week that the bull-bear spread has shown a positive, double-digit differential, the longest such streak since May-August 2005.

Continued signs of an improving economy and rising stock prices are giving AAII members reasons to stay optimistic about the short-term outlook for stock prices. Tempering this optimism are concerns about the slow pace of economic growth, rising gas prices, and Europe’s sovereign debt problems.

This week’s special question asked AAII members how much progress they thought was being made in resolving the European sovereign debt crisis. The majority of respondents thought the European Union was simply buying time instead of making true progress. A notable minority of respondents thought real progress on a solution was being made, however.

Here is a sampling of the responses:

“Enough progress has been made to kick the can down the road for a while longer, but not enough to prevent an eventual meltdown.”
“Not much progress. I think that the day of reckoning is just being put off.”
“Very little, because they are continuing to kick the can down the road, instead of just dealing with the problem.”
“No long-term progress; just delaying the inevitable.”
“Progress is being made—and slow and ugly it is.”

This week’s AAII Sentiment Survey results:

Bullish: 45.6%, up 3.2 percentage points
Neutral: 27.2%, down 1.4 percentage points
Bearish: 27.2%, down 1.8 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

To contact the reporter on this story: Charles Rotblut at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com