AAII: The American Association of Individual Investors

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)?

]

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

Survey Results for Week Ending 5/16/2018

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


HISTORICAL AVERAGE: 38.3%
BULLISH
36.7%
+3.2
Percentage point
change from
last week
HISTORICAL AVERAGE: 31.4%
NEUTRAL
42.7%
+1.8
Percentage point
change from
last week
HISTORICAL AVERAGE: 30.3%
BEARISH
20.6%
-5.0
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:

The percentage of individual investors expressing pessimism about their short-term outlook for stocks is at its second-lowest level of the year.

The percentage of individual investors expressing pessimism about their short-term outlook for stocks is at its second-lowest level of the year, according to the latest AAII Sentiment Survey. At the same time, the percentage of individual investors describing their outlook as “neutral” is above 40% for a third consecutive week.

Bullish sentiment, expectations that stock prices will rise over the next six months, rebounded for a second consecutive week and rose 3.2 percentage points to 36.7%. Optimism remains below its historical average of 38.5% for the 12th consecutive week and the 13th time in 15 weeks.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rose 1.8 percentage points to 42.7%. Neutral sentiment was last higher on March 7, 2018 (45.2%). This is the 13th consecutive week with a neutral sentiment reading above the historical average of 31.0%.

Bearish sentiment, expectations that stock prices will fall over the next six months, fell 5.0 percentage points to 20.6%. Pessimism was last lower on January 3, 2018 (15.6%). The drop keeps bearish sentiment below its historical average of 30.5% for the fifth consecutive week and the 19th time out of the past 23 weeks.

At its current level, bearish sentiment is at an unusually low level, though just barely so. The breakpoint is 20.7%. Historically, below-average levels of pessimism have been followed by below-average and below-median returns for the S&P 500 index over the following six- and 12-month periods.

Neutral sentiment is above 40% on three consecutive weeks for the first time since June 29, 2017, through July 13, 2017. Historically, unusually high readings for neutral sentiment have been followed by slightly higher than average six-month returns for the S&P 500, but not significantly so.

Many individual investors, but not all, anticipate continued volatility and/or think that the current political backdrop could have a further impact on the stock market. Trade policy is influencing some individual investors’ sentiment. While many individual investors either approve of the Federal Reserve’s plan to gradually raise interest rates or don’t expect it to affect the stock market, some are concerned about the impact that rising rates will have. Also influencing sentiment are valuations, tax cuts, earnings and economic growth.

This week’s special question asked AAII members for their opinion of the current pace of economic growth. Approximately 39% have a positive view of the economy and/or expected growth, while a little over 38% have a more pessimistic view.

Those who have a positive view are pointing toward the tax cuts, change in regulations, earnings, economic indicators and a sense of optimism. Those who are negative or cautious are fretting about growth having peaked, higher interest rates, trade issues, stagnant wages and both fiscal and consumer debt.

Here is a sampling of the responses:

  • “Good for the moment. Tax reform is kicking in.”
  • “Things look good. The Fed is raising rates slowly and cautiously and the market can handle these changes. Earnings are very favorable.”
  • “Economic growth is positive, but it can be slowed by the rise in oil prices and trade negotiations.”
  • “Everyone is becoming more cautious and not willing to bet on the future.”
  • “Too early to tell the impact of the Trump tax cuts and the potential trade war.”
  • “Fueled by borrowing, so susceptible to disappearing.”

To keep reading »

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AAII Investor

Sentiment Survey

Learn where individual investors think the market is headed over the next six months and how these levels may be used to forecast future market movement.

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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 »




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