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 12/7/2016

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


HISTORICAL AVERAGE: 38.5%
BULLISH
43.1%
-0.7
Percentage point
change from
last week
HISTORICAL AVERAGE: 31.0%
NEUTRAL
30.4%
-0.7
Percentage point
change from
last week
HISTORICAL AVERAGE: 30.5%
BEARISH
26.5%
+1.4
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 above 40% for a fourth consecutive week, the longest such streak in nearly two years.

December 9, 2016

Optimism among individual investors about the short-term direction of the stock market is above 40% for a fourth consecutive week for the first time in approximately two years. This week's AAII Sentiment Survey also shows a decline in neutral sentiment and a modest rise in pessimism.

Bullish sentiment, expectations that stock prices will rise over the next six months, declined 0.7 percentage points to 43.1%. This marks the fourth consecutive week that optimism is above 40% and the fifth consecutive week that it is above its historical average of 38.5%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, declined 0.7 percentage points to 30.4%. The modest decrease puts neutral sentiment back below its historical average of 31.0%.

Bearish sentiment, expectations that stock prices will fall over the next six months, rose 1.4 percentage points to 26.5%.  Even with the increase, pessimism is below its historical average of 30.5% for a fifth consecutive week.

Bullish sentiment readings in the low- to mid-40s have been a normal occurrence throughout the history of the survey. During most of the past 24 months, however, readings above 40% have been fairly rare. For example, the last time optimism held above 40% on four consecutive weeks was December 25, 2014, through January 15, 2015. In total, there have only been 14 weeks over the past 24 months with optimism at or above 40%.

Though the new record highs are giving individual investors encouragement, or at least calming fears about a drop occurring in the short term, the election’s outcome remains front and center for many AAII members. Some are encouraged by possible changes President-elect Donald Trump could make, while others are uncertain or want to wait to see how his administration’s policies and their impact evolve. There are also individual investors who are pessimistic following the election. Beyond the election, the direction of interest rates, the pace of economic and earnings growth, and valuations are influencing individual investors’ expectations for the stock market.

This week’s special question asked AAII members what they thought about the post-election rise in stock prices. Responses were mixed. The largest group, nearly 38% of all respondents, think prices are rising on expectation of the changes President-elect Donald Trump will bring. The easing of business regulations and lower taxes were specifically mentioned. Slightly less than a quarter of all respondents (22%) think the rally is temporary, with a reversal potentially occurring during the first half of next year. Nearly 14% think stocks have either risen too far too fast or do not believe the rally is justified by the current underlying fundamentals. Other respondents described the rally as a reaction to the uncertainty about the election being over, are taking a wait-and-see approach or say they are surprised by the rally.

Here is a sampling of the responses:

  • “The market likes the idea of a Republican-controlled government. Less regulation and less business taxes.”
  • “A temporary boost due to the election of a market-friendly president. I see a downside to the market in the new year.”
  • “Fleeting, as there are not solid fundamentals to support run-up.”
  • “People are optimistic about the economy and possible tax cuts.”
  • “I think it’s a relief that the uncertainty is over.”

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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 »