AAII Sentiment Survey: Optimism Falls to a Nine-Month Low

Optimism among individual investors about the short-term direction of the stock market is at a nine-month low. The latest AAII Sentiment Survey also shows the percentage of investors describing their outlook as “neutral” being at a five-month high.

Bullish sentiment, expectations that stock prices will rise over the next six months, declined 2.0 percentage points to 22.2%. Optimism was last lower on October 9, 2019 (20.3%). Bullish sentiment is below its historical average of 38.0% for the 17th consecutive week and the 22nd week this year.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rose 5.0 percentage points to 32.0%. This is the first time since February 12, 2020, that neutral sentiment is above its historical average of 31.5%.

Bearish sentiment, expectations that stock prices will fall over the next six months, fell 3.0 percentage points to 45.9%. Pessimism remains above its historical average of 30.5% for the 19th consecutive week and the 21st time this year.

This week’s bullish sentiment reading is tied for the 83rd lowest level recorded by our survey out of more than 1,700 weekly results. While optimism remains at an unusually low level, pessimism is at an unusually high level. Historically, both have generally been followed by above-average and above-median returns for the S&P 500 index, though the link is stronger for unusually low bullish sentiment than it is for unusually high bearish sentiment.

The current level of pessimism reflects concerns about the coronavirus pandemic and the economy. However, some AAII members have been encouraged by the rebound in the stock market from its March lows. Other factors influencing AAII members’ sentiment include the economy, corporate earnings, the November U.S. presidential election and interest rates.

This week’s AAII Sentiment Survey results:

• Bullish: 22.2%, down 2.0 percentage points
• Neutral: 32.0%, up 5.0 percentage points
• Bearish: 45.9%, down 3.0 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.