AAII Sentiment Survey: Highest Optimism Since January 2018

Optimism among individual investors about the short-term direction of the stock market rose to its highest level in nearly three years. Meanwhile, both neutral and bearish sentiment declined.

Bullish sentiment, expectations that stock prices will rise over the next six months, rose 17.9 percentage points to 55.8%. Optimism was last higher on January 3, 2018 (59.8%). Prior to this week’s reading, bullish sentiment had been at or below its historical average of 38.0% for 35 consecutive weeks.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, fell by 11.3 percentage points to 19.3%. This is the lowest reading since April 8, 2020 (18.7%). Neutral sentiment is below its historical average of 31.5% for the 42nd time out of the past 44 weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, declined 6.6 percentage points to 24.9%. Pessimism was last lower on January 22, 2020 (24.8%). Prior to this week’s reading, bearish sentiment had been above its historical average of 30.5% for 37 consecutive weeks.

Optimism is now at an unusually high level. Neutral sentiment is at an unusually low level. Historically, both above-average readings for bullish sentiment and below-average readings for neutral sentiment have been followed by below-average six- and 12-month returns for the S&P 500 index.

We send out weekly reminders about taking the survey to a rotating group of AAII members every Monday. It seems likely that this week’s results were influenced by the coinciding news about the successful trials for the coronavirus vaccine being developed by Pfizer and BioNTech.

Also influencing individual investors’ sentiment are the outcome of the election, the economy, valuations and interest rates.

This week’s AAII Sentiment Survey results:

• Bullish: 55.8%, up 17.9 percentage points
• Neutral: 19.3%, down 11.3 percentage points
• Bearish: 24.9%, down 6.6 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.