AAII Sentiment Survey: Pessimism Back Above 40%

More than two out of five individual investors describe themselves as being pessimistic about the short-term outlook for stock prices for the third time in four weeks. The latest AAII Sentiment Survey also shows a continuing trend of unusually low optimism and lower neutral sentiment.

Bullish sentiment, expectations that stock prices will rise over the next six months, declined by 0.5 percentage points to 26.1%. The modest pullback keeps optimism below its historical average of 38.0% for the 27th time this year.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, reversed last week’s increase by falling 2.0 percentage points to 31.7%. Nonetheless, neutral sentiment is above its historical average of 31.5% for the 14th time in 15 weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, rose 2.5 percentage points to 42.2%. Pessimism is above its historical average of 30.5% for the 13th time in 16 weeks.

As noted above, bullish sentiment continues to be at an unusually low level (more than one standard deviation below average) and bearish sentiment is back at an unusually high level. 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 and unusually high levels of pessimism.

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: 26.1%, down 0.5 percentage points
• Neutral: 31.7%, down 2.0 percentage points
• Bearish: 42.2%, up 2.5 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.