AAII Sentiment Survey: Bullish Sentiment Rises, Approaching Historical Average

Bullish sentiment increased modestly to its highest level in five weeks, according to the latest AAII Sentiment Survey. In addition, the number of investors describing their outlook for stocks as “neutral” decreased for the second consecutive week.

Bullish sentiment, expectations that stock prices will rise over the next six months, rose 0.9 percentage points to 37.0%. Despite the increase, this is the fifth consecutive week that optimism is below the historical average of 38.0%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, fell 0.7 percentage points to 31.5%. This matches the historical average. Neutral sentiment has been at or above average for 15 out of the past 16 weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, declined by 0.2 percentage points to 31.5%. This is the second consecutive week and the third time out of the last 27 weeks that bearish sentiment is above the historical average of 30.5%

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

The return to normalcy from the coronavirus pandemic, inflationary pressures and monetary and fiscal stimulus 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 their thoughts on how oil prices were impacting their outlook for stocks.

Almost three out five respondents (58%) say that oil prices are having no impact on their portfolios or their outlook on stocks. Many indicated that they are avoiding oil stocks due to the uncertainty related to them. This compares to 14% of respondents who say that they have a positive outlook, mentioning that falling oil prices is a sign of market optimism. About 11% of responses convey a negative outlook, citing that oil prices would only add to inflation and thus be a negative for stocks. In addition, 7% of respondents view oil prices as having a mixed impact, one that would negatively affect some sectors but positively impact others.

Here is a sampling of the responses:

• “Nothing out of the ordinary. I’m avoiding oil-related stocks because of all the uncertainty.”
• “Oil prices have started to come down over the last several weeks and are now trading less than $70 per barrel. That is a positive for the market.”
• “Oil prices will add to overall inflation, which has a negative impact on stock prices.”
• “Higher oil prices will cause me to be more bearish on the overall market, but in an inflationary environment oils and energy-related stocks may do well.”
• “Only a slight negative to me. Right now, it’s all about earnings with the Federal Reserve keeping to low rates. Inflation and tax increases are bigger headwinds going forward.”

See more Sentiment Survey results.