AAII Sentiment Survey: Bullish Sentiment Falls to a 7-Month Low

Bullish sentiment among individual investors about the short-term direction of the stock market fell to its lowest level since October 2020. The latest AAII Sentiment Survey also shows an increase in both neutral and bearish sentiment.

Bullish sentiment, expectations that stock prices will rise over the next six months, declined 0.6 percentage points to 36.4%. Bullish sentiment was last lower on October 28, 2020 (35.3%). Optimism is below its historical average of 38.0% for the third time in 16 weeks.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rose 0.4 percentage points to 37.1%. Neutral sentiment was last higher on January 1, 2020 (40.9%). Neutral sentiment remains above its historical average of 31.5% for the fifth consecutive week and the sixth time this year.

Bearish sentiment, expectations that stock prices will fall over the next six months, rose 0.2 percentage points to 26.4%. Bearish sentiment remains below its historical average of 30.5% for the 16th consecutive week.

At current levels, all three sentiment readings are within their typical historical ranges.

The return to normalcy from the coronavirus pandemic, monetary and fiscal stimulus and inflationary pressures are influencing individual investors’ outlook for stocks. Other factors include earnings, the Biden administration’s initiatives and valuations.

In this week’s special question, we asked AAII members to share their thoughts about first-quarter earnings.

Nearly two out of five of respondents (37%) say that they were less than convinced by first-quarter results, citing inflation and high prices as a major concern. This compares to 23% of respondents who say that they are neutral about first-quarter earnings and don’t feel that earnings pointed to any future gains.

About 18% of respondents say that they feel positive about first-quarter earnings, with many companies beating earnings estimates. Many within this group also say that they expect to see moderate growth as a result of these earnings numbers.

Here is a sampling of the responses:

• “It was a good quarter. More companies beat their estimates than not. The trend looks like it will continue.”
• “Considering the pandemic, first-quarter earnings were much better than I expected.”
• “Inflation is on the rise and will reduce my buying power.”
• “Many companies are beating estimates, but there has been a limited stock price response.”

See more Sentiment Survey results.