AAII Sentiment Survey: Pessimism Falls to an 11-Month Low

The percentage of individual investors describing their short-term outlook as “bearish” is at an 11-month low in the latest AAII Sentiment Survey. The latest AAII Sentiment Survey also shows optimism rebounding back to an unusually high level.

Bullish sentiment, expectations that stock prices will rise over the next six months, rose 1.8 percentage points to 49.1%. Optimism is above its historical average of 38.0% for the fourth consecutive week.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rose 3.0 percentage points to 28.3%. Even with the increase, neutral sentiment remains below its historical average of 31.5% for the 45th time out of the past 47 weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, declined 4.8 percentage points to 22.7%. Pessimism was last lower on January 1, 2020 (21.9%). Pessimism is below its historical average of 30.5% for the fourth consecutive week.

As noted above, bullish sentiment is back at an unusually high level (more than one standard deviation above its historical average). Historically, such readings have been followed by lower-than-average six- and 12-month returns by the S&P 500 index. Given the possibility of coronavirus vaccines soon being available, the historical trends may not be repeated.

Pessimism is near the bottom of its typical range. The breakpoint between typical and unusually low readings is 21%.

The positive results from Pfizer’s and Moderna’s late-stage trials for the coronavirus vaccine have made many individual investors either more optimistic or, at least, less pessimistic. Concern about the shorter-term trends in coronavirus cases and the resulting economic impact remain, however. Also influencing individual investors’ sentiment are the results of the recent election, valuations and interest rates.

This week’s AAII Sentiment Survey results:

• Bullish: 49.1%, up 1.8 percentage points
• Neutral: 28.3%, up 3.0 percentage points
• Bearish: 22.7%, down 4.8 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.

If you want to become an effective manager of your own assets and achieve your financial goals, consider a risk-free 30-day Trial AAII Membership

See more Sentiment Survey results.