AAII Sentiment Survey: Bullish Sentiment Plunges, Neutral Sentiment Bounces Back

Optimism among individual investors plunged following last week’s big gain but remains above its historical average in the latest AAII Sentiment Survey. In addition, both neutral and bearish sentiment bounced back.

Bullish sentiment, expectations that stock prices will rise over the next six months, dropped 8.5 percentage points to 40.2%. Even with the decline, optimism remains above its historical average of 38.0% for the 29th week out of the past 34 weeks. 

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rose 6.1 percentage points to 35.3%. Neutral sentiment is above its historical average of 31.5% for the 10th time in 11 weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, rose 2.3 percentage points to 24.5%. Pessimism is below its historical average of 30.5% for the 22nd consecutive week. 

At current levels, all three 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, valuations and the Biden administration’s initiatives. 

In this week’s special question, we asked AAII members to share how their portfolio has performed in the first half of 2021, relative to their expectations.

Nearly two out of five respondents (37%) say that their portfolios performed significantly better than expected. Some AAII members report percentage returns in the high teens. This compares to 35% of respondents who say that their portfolios performed at least slightly better than expectations. About 13% of respondents say that their portfolios’ performance was in line with their expectations. About 9% of responses say that their portfolio performed at least slightly worse to much worse than expected, with a few citing inflationary concerns.

Here is a sampling of the responses:

• “It has a return of around 16% for the year. This is better than I expected. I was looking for a return of around 6% to 8% for the year.”
• “My portfolio is up a small amount, I expected it to be somewhat higher.”
• “My portfolio is about what I expected, up around 12% year to date.”
• “A little below what I have been expecting.”
• “I do not change my asset allocation based on daily news or how I ‘feel’ about it. I select an allocation that I can live with no matter what happens. I am a long-term investor.”

See more Sentiment Survey results.