AAII Sentiment Survey: Highest Neutral Sentiment in Almost Two Years

The percentage of individual investors describing their short-term outlook for stocks as “neutral” is at its highest level in nearly two years. The latest AAII Sentiment Survey also shows a significant drop in bearish sentiment.

Bullish sentiment, expectations that stock prices will rise over the next six months, increased by 3.1 percentage points to 29.7%. This is the third consecutive week that bullish sentiment remains below the historical average of 38.0%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, increased by 8.8% percentage points to 39.8%. Neutral sentiment was last higher on January 1, 2020 (40.9%). The historical average is 31.5%.

Bearish sentiment, expectations that stock prices will fall over the next six months, plunged by 11.9 percentage points to 30.5%. This week’s reading matches the historical average. The significant decline in bearish sentiment follows last week’s reading of 42.4%, which was the highest level since August 19, 2020.

The big moves in neutral and bearish sentiment occurred as the major indexes recouped much of the losses incurred when the new coronavirus omicron variant began spreading. The return to normalcy from the coronavirus pandemic, monetary and fiscal stimulus and inflationary pressures are also influencing individual investors’ outlook for stocks. Additional factors include earnings, valuations and the Biden administration’s initiatives.

In this week’s special question, we asked AAII members how the coronavirus pandemic, including the new omicron variant, is influencing their outlook for stock prices.

More than two of out five respondents (44%) say that they have a neutral outlook. Many respondents indicate that they are long-term investors and are not worried about factors such as coronavirus variants A negative, or bearish, outlook on stock prices is reported by 33% of respondents, mostly attributed to the volatility and fluctuating prices caused by the coronavirus and its variants. Conversely, 15% of respondents have a bullish, or positive, outlook, indicating that they feel the market is beginning to get used to pandemic-related volatility and variants.

Here is a sampling of the responses:

• “It is not influencing my investment decisions. It’s a short-term issue that’s already reflected in stock prices.”
• “In the medium term, the pandemic response is negative. The U.S. government has distributed much cash to us, which ought to be paid back via future taxes, and should reduce market returns.”
• “Positively. Progress fighting the pandemic will reduce uncertainty and boost confidence leading to more buying.”

See more Sentiment Survey results.