AAII Sentiment Survey: Optimism Back at an Unusually High Level

Bullish sentiment among individual investors about the short-term direction of the stock market rose to its highest level since the end of April 2021. The latest AAII Sentiment Survey also shows a decrease in both neutral and bearish sentiment.

Bullish sentiment, expectations that stock prices will rise over the next six months, rose 8.2 percentage points to 48.6%. Bullish sentiment was last higher on April 22, 2021 (52.7%). 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 7.1 percentage points to 29.2%. Neutral sentiment was last lower on April 22, 2021 (26.8%). This week’s reading is also below the historical average of 31.5%, ending a nine-consecutive-week streak of above-average readings.

Bearish sentiment, expectations that stock prices will fall over the next six months, fell 1.2 percentage points to 22.2%. Pessimism remains below its historical average of 30.5% for the 21st time this year.

At current levels, both neutral and bearish sentiment readings are within their typical historical ranges. Bullish sentiment is now back at an unusually high level. Historically, unusually high levels of optimism have been followed by lower-than-average and lower-than-median returns for the S&P 500 index over the following six- and 12-month periods.

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, valuations and the Biden administration’s initiatives.

For this week’s special question, we asked AAII members to share which industries or sectors they think are attractive buying opportunities in the current market environment. Financials ranked highest in terms of popularity, named by 22% of respondents. Many pointed to global banks as a key factor. Technology came in a close second, picked by about 21% of respondents. Industrials and infrastructure companies, including transportation and construction stocks, were listed by 20% of respondents. Energy was mentioned by about 19% of respondents.

Other sectors and industries mentioned included materials (15% of respondents); consumer discretionary sector, particularly the travel and airlines industry (14%); real estate and REITs, (9%); and health care (8%).

Several respondents listed more than one sector or industry.

See more Sentiment Survey results.