AAII Sentiment Survey: Neutral Sentiment Rebounds Strongly

The percentage of individual investors describing their short-term outlook for stocks as “neutral” rebounded strongly. The latest AAII Sentiment Survey also shows declines in both optimism and pessimism.

Bullish sentiment, expectations that stock prices will rise over the next six months, fell 5.1 percentage points to 24.7%. Optimism was last lower on December 12, 2018 (20.9%). This is the 14th time this year that optimism is below its historical average of 38.5%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rose 8.3 percentage points to 39.2%. The increase puts neutral sentiment back above its historical average of 31.0% for the 16th time in 17 weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, pulled back by 3.2 percentage points. Even with the decrease, pessimism is above its historical average of 30.5% on back-to-back weeks for the first time since January.

Since setting a 2019 high of 43.1% two weeks ago, bullish sentiment has fallen by a cumulative 18.4 percentage points. At its current level, optimism is at an unusually low level. Such readings have historically been followed by higher-than-median six- and 12-month returns in the S&P 500 index.

Many individual investors have been monitoring trade negotiations, particularly between the U.S. and China. We’ve also heard from AAII members who are concerned about a drop in stock prices occurring, though there are other members who have been encouraged by this year’s upward run in stock prices. Also having an influence are monetary policy, Washington politics (including President Trump), geopolitics, valuations, corporate earnings and the pace of economic growth.

This week’s AAII Sentiment Survey results:

• Bullish: 24.7%, down 5.1 percentage points
• Neutral: 39.2%, up 8.3 percentage points
• Bearish: 36.1%, down 3.2 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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See more Sentiment Survey results.