AAII Investor Sentiment Survey

Since 1987, AAII members have been answering the same simple question each week:

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Do you feel the direction of the market over the next six months will be up (bullish), no change (neutral) or down (bearish)?

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The results are compiled into the AAII Investor Sentiment Survey,
which offers insight into the mood of individual investors.

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Survey Results for Week Ending 5/25/2016

Data represents what direction members feel the
stock market will be in next 6 months.


HISTORICAL AVERAGE: 38.5%
BULLISH
17.8%
-1.6
Percentage point
change from
last week
HISTORICAL AVERAGE: 31.2%
NEUTRAL
52.9%
+6.3
Percentage point
change from
last week
HISTORICAL AVERAGE: 30.3%
BEARISH
29.4%
-4.7
Percentage point
change from
last week

Note: Numbers may not add up to 100% because of rounding.

The AAII Investor Sentiment Survey has become a widely followed measure of the mood of individual investors. The weekly survey results are published in financial publications including Barron's and Bloomberg and are widely followed by market strategists, investment newsletter writers and other financial professionals.

AAII Sentiment Survey:

Optimism is below 20% and neutral sentiment is above 50% on the same week, for just the sixth time in the survey’s history.

The percentage of individual investors optimistic about short-term gains occurring in the stock market is at its lowest level in 11 years. At the same time, the percentage of investors describing their outlook as neutral is at its highest level in 16 years, according to the latest AAII Sentiment Survey.

Bullish sentiment, expectations that stock prices will rise over the next six months, declined 1.6 percentage points to 17.8%. This is the lowest level of optimism recorded by our survey since April 14, 2005 (16.5%). It is also the 29th consecutive week and the 62nd out of the past 64 weeks that bullish sentiment has been below its historical average of 39.0%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, jumped 6.3 percentage points to 52.9%. Neutral sentiment was last higher on April 12, 1990 (56.0%). Neutral sentiment has now been above 40% for 12 consecutive weeks and above its historical average of 31% for 17 consecutive weeks, as well as for 69 out of the past 73 weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, fell 4.7 percentage points to 29.4%. The historical average is 30%.

Since the AAII Sentiment Survey started in June 1987, a neutral sentiment reading above 50% has only been recorded 28 times. Only six of those readings were recorded after 1989 (January 1991, July 1991, August 1994, February 2003, December 2015 and this week). The remaining 22 readings are all from the approximate two-year span of December 1987 through October 1989. On average, the S&P 500's 26- and 52-week returns following such occurrences were 8.4% and 20.5%, respectively.

Even rarer is having bullish sentiment below 20% and neutral sentiment above 50% on the same week. This week is just the sixth time such a combination has happened. It previously occurred four times in 1988 and once in 1989. On average, the S&P 500's 26- and 52-week returns following those five occurrences were 11.2% and 25.7%, respectively.

More information is available on the AAII Blog. This morning we posted a table showing every occurrence neutral sentiment was above 50% and the market's subsequent returns, as well as a table showing the six weeks with bullish sentiment below 20% and neutral sentiment above 50%. In addition, last week we published a listing of the previous 30 sub-20% bullish sentiment readings and the S&P 500’s subsequent returns. Keep the small sample size and the dates of those readings (especially with neutral sentiment) in mind when reviewing the data.

Giving individual investors cause for concern is the slow pace of U.S. economic growth and uncertain global economic growth, terrorism and global unrest, lackluster corporate earnings, the prevailing level of valuations, the forthcoming election and monetary policy. Some AAII members, however, are encouraged by sustained domestic economic growth, corporate earnings and still comparatively low energy prices.

This week’s special question asked AAII members how first-quarter earnings have influenced their outlook for stock prices. Slightly more than one out of four respondents (27%) said that quarterly results have not altered their outlook. Many said they don’t alter their expectations based on quarterly results, while several others pointed to other factors (namely the November elections and monetary policy) as having a larger impact. Nearly 22% viewed first-quarter earnings as not being good or supportive of current stock prices. Just 5% of respondents feel more positive in reaction to first-quarter earnings.

Slightly more than 7% of respondents simply described their outlooks as pessimistic without mentioning earnings. Several others described market volatility and the upcoming presidential election as impacting their outlook.

Here is a sampling of the responses:

  • “Corporate earnings are slowing and/or stagnating. This will have a negative impact on stocks in general.”
  • “Way too much Fed speak for stocks to go up no matter what earnings are.”
  • “Expecting stocks to retreat until after the November election.”
  • “I feel earnings have been better than expected, so I’m slightly more bullish.”
  • “No influence. I do not pay a lot of attention to short-term earnings and projections.”

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How to Use the AAII Sentiment Survey as a Gauge of Future Market Direction

Over the years, AAII analysts have examined the weekly results and have tried to give some perspective to the data. These articles are the results of some of this analysis.

Analyzing the AAII Sentiment Survey Without Hindsight »
Using the AAII Sentiment Survey as a Contrarian Indicator »