AAII Sentiment Survey: Optimism Falls to an Extraordinarily Low Level

Optimism among individual investors about the short-term direction of the stock market is at its lowest level in over four years. The latest AAII Sentiment Survey also shows higher levels of neutral and bearish sentiment.

Bullish sentiment, expectations that stock prices will rise over the next six months, fell 5.8 percentage points to 20.2%. This ranks among the 40 lowest readings ever recorded by the AAII Sentiment Survey. Optimism was last lower on May 25, 2016 (17.8%). The drop keeps bullish sentiment below its historical average of 38.0% for the 21st consecutive week and the 26th week this year.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rose 4.2 percentage points to 31.3%. The historical average is 31.5%.

Bearish sentiment, expectations that stock prices will fall over the next six months, rose 1.6 percentage points to 48.5%. Pessimism is above its historical average of 30.5% for the 23rd consecutive week and the 25th time this year.

As noted above, this week’s bullish sentiment ranks among the 40 lowest readings out of more than 1,700 weekly results. Meanwhile, bearish sentiment remains at an unusually high level for the 19th time out of 21 weeks. 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 optimism than it is for unusually high pessimism.

This week’s AAII Sentiment Survey results:

• Bullish: 20.2%, down 5.8 percentage points
• Neutral: 31.3%, up 4.2 percentage points
• Bearish: 48.5%, up 1.6 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.