AAII Sentiment Survey: Optimism Declines but Remains Unusually High

Optimism among individual investors about the short-term direction of the stock market declined but remained unusually high. Pessimism rebounded while neutral sentiment declined.  

Bullish sentiment, expectations that stock prices will rise over the next six months, declined 1.0 percentage points to 48.1%. Optimism is above its historical average of 38.0% for the fifth consecutive week.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, fell 3.2 percentage points to 25.1%. Even with the decrease, neutral sentiment remains below its historical average of 31.5% for the 46th time out of the past 48 weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, rebounded by 4.2 percentage points to 26.9%. Pessimism is below its historical average of 30.5% for the fifth consecutive week.

As noted above, bullish sentiment remains at an unusually high level (more than one standard deviation above its historical average). It is above the breakpoint between typical and unusually high readings of 48.0% for the second consecutive week and the third time out of the past five weeks. Historically, such readings have been followed by lower-than-average six- and 12-month returns for the S&P 500 index. Given the possibility of coronavirus vaccines soon being available, the historical trends may not be repeated.

The positive results from Pfizer’s and Moderna’s late-stage trials 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: 41%, down 1.0 percentage points
• Neutral: 21%, down 3.2 percentage points
• Bearish: 29%, up 4.2 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.