AAII Sentiment Survey: Optimism Rises to a Nine-Week High

The percentage of individual investors describing their short-term outlook as “bullish” is at a nine-week high in the latest AAII Sentiment Survey. Both pessimism and neutral sentiment declined.

Bullish sentiment, expectations that stock prices will rise over the next six months, rose 1.6 percentage points to 47.1%. Optimism was last higher on December 9, 2020 (48.1%). Bullish sentiment is above its historical average of 38.0% for the 12th week out of the past 14 weeks.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, fell 0.7 percentage points to 27.6%. Neutral sentiment remains below its historical average of 31.5% for the 54th time out of the past 57 weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, declined 0.9 percentage points to 25.4%. The historical average is 30.5%.

Bullish sentiment is near the upper end of its typical historical average. Readings above 48.0% are considered to be unusually high. Both neutral and bearish sentiment are well within their typical ranges.

The ongoing coronavirus pandemic, including the distribution of vaccines, continues to have a big influence on individual investors’ outlook for the stock market. Other factors include the new administration’s policies, economic trends, the current level of valuations, economic stimulus and the possibility of inflation.

This week’s special question asked AAII members how big of a concern they think the possibility of inflation growing stronger in the future is.

More than half of all respondents (56%) say that they are very concerned about the possibility of inflation growing stronger in the near future. This compares to 30% of respondents who say that they are moderately concerned about inflation growing in the future, but do not think it will be a major impact. In addition, about 12% of respondents say that they are less concerned about the near future but highly concerned about inflation in the long term.

Here is a sampling of the responses:

• “Without a doubt inflation will grow in the future. However, the impact of the coronavirus pandemic is difficult to predict as it has already had a significant overall negative affect on the world’s economies. I wonder how the borrowings by the nation’s banks and resource shortages due to supply-chain issues will push up inflation.”
• “Very big concern. With 0% rates, huge government spending and money printing, it will start kicking in over the next six to 12 months.”
• “Low concern for the next year or so. Huge, huge for the long-term future, primarily because of global monetary policy by many governments. The advent of bitcoin-type currencies will probably make inflation worse.”
• “As long as the Federal Reserve keeps printing money, it will be low. However, once the presses stop, watch out.”
• “Absolutely none for the foreseeable future ... going on over 12 years with no consequences for the Fed’s massive printing of money ... but some day there will be hyperinflation galore.”
• “With commodities prices rising, that is the first sign it is going up. I believe we will see that within six months after the majority of the U.S. is vaccinated.”

See more Sentiment Survey results.