AAII Sentiment Survey: Optimism Unusually Low for Third Week

Optimism about the short-term direction of the stock market among individual investors remains at an unusually low level despite rebounding for a second consecutive week. The latest AAII Sentiment Survey also shows slightly higher neutral sentiment and lower bearish sentiment.

Bullish sentiment, expectations that stock prices will rise over the next six months, rose 3.5 percentage points to 26.6%. Nonetheless, optimism is below its historical average of 38.0% for the 26th time this year.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rose 1.7 percentage points to 33.6%. The increase keeps neutral sentiment back above its historical average of 31.5% for the 13th time in 14 weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, fell 5.1 percentage points to 39.7%. Pessimism is above its historical average of 30.5% for the 12th time in 15 weeks.

As noted above, bullish sentiment continues to be at an unusually low level (more than one standard deviation below average). Historically, the S&P 500 index has experienced above-average and above-median returns during the six- and 12-month periods following unusually low levels of optimism. Bearish sentiment is back within its typical range, though barely so.

Many individual investors have been monitoring trade negotiations, particularly between the U.S. and China. Additionally, many AAII members expect a recession to start within the next 12 to 24 months. Also having an influence on sentiment are Washington politics, geopolitics, valuations, corporate earnings, monetary policy and interest rates.

This week’s AAII Sentiment Survey results:

• Bullish: 26.6%, up 3.5 percentage points
• Neutral: 33.6%, up 1.7 percentage points
• Bearish: 39.7%, down 5.1 percentage points

Historical averages:

• Bullish: 38.0%
• Neutral: 31.5%
• 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.