AAII Sentiment Survey: Optimism Rebounds but Remains Unusually Low

Optimism among individual investors continues to be unusually low despite rising to a four-week high in the latest AAII Sentiment Survey. Both neutral and bearish sentiment are lower this week.

Bullish sentiment, expectations that stock prices will rise over the next six months, rose 5.0 percentage points to 27.2%. Nonetheless, optimism remains below its historical average of 38.0% for the 18th consecutive week and the 23rd week this year.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, pulled back by 1.8 percentage points to 30.2%. Neutral sentiment is below its historical average of 31.5% for the 24th week this year.

Bearish sentiment, expectations that stock prices will fall over the next six months, fell 3.2 percentage points to 42.7%. Pessimism remains above its historical average of 30.5% for the 20th consecutive week and the 22nd time this year.

As noted above, optimism remains at an unusually low level. At the same time, pessimism continues to be 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: 27.2%, up 5.0 percentage points
• Neutral: 30.2%, down 1.8 percentage points
• Bearish: 42.7%, down 3.2 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.