AAII Sentiment Survey: Bullish Sentiment Plummets to One-Year Low, Bearish Sentiment Rises

The results from the latest AAII Sentiment Survey show a major decrease in bullish sentiment, conveying lower optimism among investors that the current bull market will continue. In addition, the number of investors who describe their outlook for stocks as “neutral” increased.

Bullish sentiment, expectations that stock prices will rise over the next six months, dropped 16.4 percentage points to 22.4%. This is the lowest level of bullish sentiment since July 29, 2020, over one year ago. Optimism is well below the historical average low of 28.0% (one standard deviation below the historical average of 38.0%).

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rose 4.4 percentage points to 38.3%. This is the second consecutive week that neutral sentiment is above the historical average of 31.5%.

Bearish sentiment, expectations that stock prices will fall over the next six months, rose by 12.1 percentage points to 39.3%. This is the seventh time out of the last nine weeks that pessimism is above the historical average of 30.5%.

At current levels, optimism is unusually low. Neutral and bearish sentiment are near the top end of 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 thoughts about the impact that supply shortages are having on their outlook for stocks.

We received over 100 responses, of which 32% of respondents say that they feel the supply shortage could have a negative impact, predicting a decrease in sales and lackluster earnings. This compares to 31% of respondents who say that it is having little to no impact. About 19% of respondents express a mixed outlook on the impact of supply shortages, implying it could help some industries but hurt others. Conversely, 10% of respondents have positive sentiments regarding supply shortages, citing recovery. About 7% of responses fell into the “other” category.

Here is a sampling of the responses:

• “Sales are going to be limited this year and earnings per share (EPS) will fall dramatically.”
• “Not much. I think low interest rates and strong earnings will fuel a continued bullish outlook for stocks. I do expect a correction during this time frame with a quick reversal.”
• “Transportation companies will continue to increase profits, but car companies will continue to struggle with higher costs and lower profits with reduced sales volume.”
• “Bullish. Gives pricing power to companies to raise prices.”

See more Sentiment Survey results.