AAII Investor Sentiment Survey

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Since 1987, AAII members have been answering the same simple question each week. The results are compiled into the AAII Investor Sentiment Survey,
which offers insight into the mood of individual investors.

Survey Results for Week Ending 7/20/2016

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

Percentage point
change from
last week
Percentage point
change from
last week
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 remained below-average despite the further ascent by the Dow Jones industrial average and the S&P 500 index into record territory. Part of the reason is that AAII members have mixed thoughts about the record highs.

July 21, 2016

The further ascent by the Dow Jones industrial average and the S&P 500 index into record territory did not translate into higher optimism among individual investors. The latest AAII Sentiment Survey shows bullish sentiment—as well as neutral sentiment—declining, and bearish sentiment rising. The changes were modest, however.

Bullish sentiment, expectations that stock prices will rise over the next six months, pulled back by 1.4 percentage points to 35.4%. Optimism is below its historical average of 38.5% for the 37th consecutive week and the 70th out of the past 72 weeks.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, slipped 0.9 percentage points to 37.9%. Nonetheless, neutral sentiment is above its historical average of 31.0% for the 25th consecutive week.

Bearish sentiment, expectations that stock prices will fall over the next six months, rebounded by 2.3 percentage points to 26.7%. Pessimism was last lower on April 20, 2016 (23.9%). The historical average is 30.5%.

While optimism among individual investors remains below average, it has still shown recent signs of improvement, with bullish sentiment above 30% for the third consecutive week. To put this into perspective, optimism has only stayed above 30% for a span of three consecutive weeks just one other time this year (February 24 through March 9).

A lack of perceived viable investment alternatives, economic growth and upward momentum in stock prices is encouraging some individual investors about the short-term direction of stock prices. Giving reason for caution or pessimism is global economic uncertainty (including Brexit), the prevailing level of valuations and disappointment with corporate earnings growth. The presidential election and monetary policy are also impacting individual investor sentiment.

This week’s special question asked AAII members what they thought about the S&P 500 rising to new record highs. Responses varied, as did the reasons given for those responses. About one out of three respondents (34%) either think the recent rally will not last or are concerned about its short-term sustainability. There was not one consensus reason given for this opinion, though several respondents believe the underlying fundamentals and/or macroeconomic conditions do not support the new highs. Several others anticipate a pullback or a correction occurring sometime this fall. Slightly more than 11% of respondents have the opposite opinion and think stocks could continue to rise. A nearly even number of respondents attributed the new highs to a lack of good alternatives for investment dollars. About 9% aren’t surprised or say the new highs were expected. Nearly 8% of respondents expressed skepticism about the rally, saying that stocks are being inflated by loose monetary policy.

Here is a sampling of the responses:

  • “I think it shows that people have no place else to put their money.”
  • “Enjoying the ride up, but the underpinnings are scary in their comparative height above the norms.”
  • “I think it still has a ways to go up.”
  • “This is too heady at this point and leads me to believe the market is going to have a big pullback in the next six months.”
  • “This high is fool’s gold. It is unsustainable.”
  • “Not a surprise, given the gradual improvement in the economy.”

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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 »