AAII Sentiment Survey: Optimism Pulls Back

Optimism among individual investors about the short-term direction of the stock market pulled back to an unusually low level. The latest AAII Sentiment Survey also shows higher neutral and bearish sentiment.

Bullish sentiment, expectations that stock prices will rise over the next six months, fell 4.8 percentage points to 26.1%. The decline keeps optimism below its historical average of 38.0% for the 20th consecutive week and the 25th week this year.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rebounded by 3.3 percentage points to 27.1%. Nonetheless, neutral sentiment remains below its historical average of 31.5% for the 26th week this year.

Bearish sentiment, expectations that stock prices will fall over the next six months, rose 1.5 percentage points to 46.8%. Pessimism is above its historical average of 30.5% for the 22nd consecutive week and the 24th time this year.

As noted above, optimism fell back to an unusually low level. Meanwhile, 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 elections and interest rates.

This week’s AAII Sentiment Survey results:

• Bullish: 26.1%, down 4.8 percentage points
• Neutral: 27.1%, up 3.3 percentage points
• Bearish: 46.8%, up 1.5 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.