AAII Sentiment Survey: Pessimism Reaches Highest Level in Six Months

Bearish sentiment is at its highest level in more than six months, according to the latest AAII Sentiment Survey. In addition, the percentage of investors describing their outlook for stocks as “bullish” pulled back.

Bullish sentiment, expectations that stock prices will rise over the next six months, fell 3.8 percentage points to 33.2%. This is the sixth 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, rose 0.2 percentage points to 31.7%. Neutral sentiment remains at or above its historical average of 31.5% for the 16th time out of the past 17 weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, rose by 3.6 percentage points to 35.1%. Pessimism was last higher on February 3, 2021, at 35.6%. This is the third consecutive week and the fourth time out of the last 28 weeks that bearish sentiment is above the historical average of 30.5%.

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 their perceptions of the current state of the housing market.

Nearly two out of five (38%) respondents say that they perceive the housing market as being in a bubble. Many indicate that they think the bubble is overheating and out of control, citing high prices and low interest rates as causes. In addition, 19% of respondents say that they have a negative outlook, with many expecting the market to crash in the short to medium term.

About 17% of respondents have a mixed outlook, expressing that they expect prices to continue to rise in the short term but eventually begin to cool off. Approximately 13% of respondents express a positive or strong perception of the market, specifically mentioning areas in states such as California with healthy outlooks. Furthermore, 7% of respondents feel demand in the housing market is greater than supply, indicating that sellers can benefit greatly in current market conditions.

Here is a sampling of the responses:

• “It’s a bubble created by the Federal Reserve policies of 0% interest rates and monthly multi-billion-dollar mortgage purchases.”
• “It will keep going up due to inflation, then crash because no one will be able to afford the high cost.”
• “Overvalue spike is underway at the present. I expect some decline in six months or more.”
• “I continue to be optimistic that it will continue to add value, particularly in the Sunbelt.”
• “Supply down, prices up, bull market in housing.”

See more Sentiment Survey results.