AAII Sentiment Survey: Pessimism Rises Back Above Its Average

Pessimism among individual investors about the short-term direction of the stock market is at a six-week high. The latest AAII Sentiment Survey also shows a further decline in optimism and a slight increase in neutral sentiment.

Bullish sentiment, expectations that stock prices will rise over the next six months, fell 5.0 percentage points to 32.4%. Optimism was last lower on January 30, 2019 (31.8%). The historical average is 38.5%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rose 0.7 percentage points to 36.5%. During the last seven 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 eighth time in 10 weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, rose 4.3 percentage points to 31.1%. Pessimism was last higher on January 30, 2019 (31.8%). This week’s increase puts bearish sentiment back above its historical average of 30.5% for the first time in six weeks.

A pullback in optimism following a very brief stint of above-average readings is nothing new. (Bullish sentiment was above average on February 20, 2019, and February 27, 2019.) Since February 28, 2018, optimism has been below average on 41 out of 55 weeks.

At current levels, all three indicators are within their typical historical ranges.

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, and the tempering of tensions may be having an impact on sentiment. 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: 32.4%, down 5.0 percentage points
• Neutral: 36.5%, up 0.7 percentage points
• Bearish: 31.1%, up 4.3 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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