AAII Sentiment Survey: Bullish Sentiment Bounces Back, Bearish Sentiment Tumbles

The percentage of individual investors describing their short-term outlook for stocks as “neutral” reached its highest level in nearly 19 months. The latest AAII Sentiment Survey also shows a rebound in optimism and a drop in bearish sentiment.

Bullish sentiment, expectations that stock prices will rise over the next six months, rose 5.5 percentage points to 36.2%. This is the third consecutive week that optimism is below the historical average of 38.5%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rose 1.0 percentage points to 39.7%. Neutral sentiment was last higher on January 1, 2020 (40.9%). Neutral sentiment is above its historical average of 31.5% for the 13th time in 14 weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, sharply declined by 6.5 percentage points to 24.1%. This is the 32nd time out of the past 37 weeks that pessimism is below its historical average of 30.5%.

Neutral sentiment is now at the top of its typical historical range. The breakpoint between typical and unusually high readings is 39.8% (or one standard deviation above the historical average).

The return to normalcy from the pandemic as well as the emergence of the delta variant of the coronavirus, monetary and fiscal stimulus and inflationary pressures are influencing individual investors’ outlook for stocks. Other factors include Washington politics, interest rates, valuations and earnings.

For this week’s special question, we asked AAII members to share their thoughts on whether they feel that the coronavirus delta variant is a risk to the economy.

A little under half of all respondents (45%) say that they view the delta variant as an economic risk. The respondents cite the increased transmissibility of the virus and inferred that it may cause more shutdowns, which would in turn slow the economy. This compares to 30% of respondents who say that the new variant is not a risk to the economy because the government is now experienced in dealing with the coronavirus and more people have been vaccinated. About 12% of responses cite the variant as a small risk, mainly to unvaccinated populations. About 7% of respondents have a neutral stance on the delta variant.

Here is a sampling of the responses:

• “Yes, the delta variant is significantly more transmissible than the original version and, while those who are fully vaccinated are generally not affected by it, there are still significant numbers of unvaccinated people who can be negatively affected. As the number of cases rise, more and more economic shutdowns will occur.”
• “No, I expect the American people and/or economy will be able to cope with this variant to minimize any further disruption.”
• “Yes, slightly. It may depress the rate of recovery, but I don’t think it’ll cause another recession. Many people have already been vaccinated and there are additional people who are either resistant or have had the virus.”
• “Unknown at this time. Hopefully as more of the populace becomes vaccinated the threat of variants will fade.”

See more Sentiment Survey results.