AAII Sentiment Survey: Pessimism Pulls Back, Optimism Still Low

Pessimism among individual investors about the short-term outlook for stock prices pulled back from its recent highs. Optimism rebounded in the latest AAII Sentiment Survey, though it is still unusually low.

Bullish sentiment, expectations that stock prices will rise over the next six months, rose 4.3 percentage points to 26.8%. Though at a four-week high, optimism is below 30% for the fifth consecutive week. It is also below its historical average of 38.5% for the 17th time this year.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rebounded by 4.1 percentage points to 39.0%. The increase keeps neutral sentiment above its historical average of 31.0% for the 19th time in 20 weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, plunged 8.4 percentage points to 34.2%. Even with the drop, pessimism is above its historical average of 30.5% for the fifth consecutive week.

Optimism continues to be at an unusually low level (more than one standard deviation above/below its respective historical averages). The lower breakpoint between typical and unusual readings is 28.1%. Historically, unusually low levels of bullish sentiment have been followed by higher-than-median and higher-than-average 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 recent rebound in stock prices may have relieved some concerns about a steeper decline in stock prices occurring, though others still anticipate a larger drop than we recently saw. 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: 26.8%, up 4.3 percentage points
• Neutral: 39.0%, up 4.1 percentage points
• Bearish: 34.2%, down 8.4 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.