AAII Sentiment Survey: Pessimism Jumps to a Seven-Year High

The level of pessimism among individual investors about the short-term direction of the stock market is at its highest level in more than seven years. The latest AAII Sentiment Survey also shows a drop in optimism and a decline in neutral sentiment.

Bullish sentiment, expectations that stock prices will rise over the next six months, fell 6.9 percentage points to 23.7%. Optimism was last lower on October 9, 2019 (20.3%). Bullish sentiment is below its historical average of 38.0% for the ninth consecutive week and the 14th week this year.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, pulled back by 1.7 percentage points to 23.7%. Neutral sentiment remains below its historical average of 31.5% for the 12th consecutive week and the 16th time in 17 weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, rose 8.6 percentage points to 52.7%. Pessimism was last higher on April 11, 2013 (54.5%). The increase keeps bearish sentiment above its historical average of 30.5% for the 11th consecutive week.

Pessimism has been at an unusually high level for nine consecutive weeks. On five of those nine weeks, bearish sentiment has been at or above 50%. Optimism, meanwhile, is at an unusually low level for the second time in three weeks.

The continued high level of pessimism reflects the ongoing bear market and the coronavirus pandemic. However, some AAII members have been encouraged by the rebound in the stock market from its March lows. Many—but not all—have also told us that they have used the downturn to look for buying opportunities among stocks (see this month’s AAII Journal for more). Other factors influencing AAII members’ sentiment include the November elections, corporate earnings, economic growth and valuations.

This week’s AAII Sentiment Survey results:

• Bullish: 23.7%, down 6.9 percentage points
• Neutral: 23.7%, down 1.7 percentage points
• Bearish: 52.7%, up 8.6 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.