AAII Sentiment Survey: Pessimism Pulls Back

Pessimism about the short-term direction of the stock market among individual investors pulled back after setting a six-week high last week. The latest AAII Sentiment Survey also shows higher levels of bullish and neutral sentiment.

Bullish sentiment, expectations that stock prices will rise over the next six months, rebounded by 4.9 percentage points to 37.3%. Optimism is below its historical average of 38.5% for the third consecutive week.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rose 2.8 percentage points to 39.3%. During the last eight weeks, neutral sentiment has fluctuated within a range of 35.3% to 39.8%. Neutral sentiment is above its historical average of 31.0% for the ninth time in 11 weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, fell by 7.6 percentage points to 23.4%. Pessimism was last lower on February 27, 2019, (20.0%). Bearish sentiment is below its historical average of 30.5% for the sixth time in seven weeks.

Most of this week’s results were recorded before the release of yesterday’s meeting statement from the Federal Open Market Committee. The survey period runs from Thursday morning through Wednesday night.

At current levels, all three indicators are within their typical historical ranges. The boundary between typical and unusually high neutral sentiment readings is 40.0%.

This year’s rebound in stock prices has encouraged some individual investors, though others have concerns about its sustainability. Many individual investors are monitoring trade negotiations, though the impact varies by investor. Also having an influence are Washington politics (including President Trump and Democratic control of the House of Representatives), corporate earnings, the Federal Reserve, valuations and concerns about the pace of economic growth.

This week’s AAII Sentiment Survey results:

• Bullish: 37.3%, up 4.9 percentage points
• Neutral: 39.3%, up 2.8 percentage points
• Bearish: 23.4%, down 7.6 percentage points

Historical averages:

• Bullish: 38.5%
• Neutral: 31.0%
• Bearish: 30.5%

Want to weigh in? Take the survey yourself and see results online at www.aaii.com/sentimentsurvey.

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