AAII Sentiment Survey: Optimism Stays Unusually Low

Expectations among individual investors for an increase in stock prices continues to stay at an unusually low level. At the same time, pessimism in the latest AAII Sentiment Survey remains at an unusually high level.

Bullish sentiment, expectations that stock prices will rise over the next six months, declined by 2.3 percentage points to 22.5%. Optimism was last lower on December 12, 2018 (20.9%). This is the fourth consecutive week bullish sentiment has been below 30% and the 16th 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, pulled back by a slight 0.2 percentage points to 34.9%. Neutral sentiment remains above its historical average of 31.0% for the 18th time in 19 weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, rose 2.5 percentage points to 42.6%. Pessimism was last higher on January 2, 2019 (42.8%). This is the fourth consecutive week that bearish sentiment is above its historical average of 30.5%.

Like last week, pessimism is at an unusually high level while optimism is at an unusually low level (more than one standard deviation above/below their respective historical averages). Historically, unusually low levels of bullish sentiment and unusually high levels of bearish sentiment have been followed by higher-than-median six-month returns for the S&P 500 index.

Many individual investors have been monitoring trade negotiations, particularly between the U.S. and China. The possibility of tariffs placed on imports from Mexico may also be having an effect. We’ve also heard from AAII members who are concerned about a drop in stock prices occurring, and the recent weakness may be playing into their worries. (Many of this week’s responses were recorded on Monday.) 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: 22.5%, up 2.3 percentage points
• Neutral: 34.9%, down 0.2 percentage points
• Bearish: 42.6%, up 2.5 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.