AAII Sentiment Survey: Bullish Sentiment Rises, Neutral and Bearish Are Above Historical Averages

Optimism rebounded into its typical historical range this week after falling to an unusually low level last week. The latest AAII Sentiment Survey also shows a decrease in the number of investors who describe their outlook for stocks as “bearish.”

Bullish sentiment, expectations that stock prices will rise over the next six months, increased 4.3 percentage points to 29.6%. This is the fifth 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 1.1 percentage points to 36.6%. This is the third consecutive week that neutral sentiment is above its historical average of 31.5%.

Bearish sentiment, expectations that stock prices will fall over the next six months, decreased by 5.4 percentage points to 33.9%. Even with the decrease, this is the fifth consecutive week that pessimism is above its historical average of 30.5%.

All three sentiment indicators are currently within their typical historical ranges.

Bullish sentiment has remained below average since the new coronavirus omicron variant began spreading. The progress toward returning to normalcy from the coronavirus pandemic, monetary and fiscal stimulus and inflationary pressures also continue to influence 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 if the Federal Reserve should raise interest rates three times in the next year.

More than half of respondents (55%) say that raising interest rates three times in 2022 is the right thing to do to curb inflation and slow consumer spending. Conversely, 27% of respondents disagree with raising the rate three times. Many of these respondents think raising interest rates just twice is a better option. Additionally, 7% of respondents have a neutral or mixed outlook, while 6% of respondents have a conditional response, with rate hikes warranted if certain factors arise.

Here is a sampling of the responses:

• “Yes. Inflation is out of control.“
• “No, once should be enough, two only if inflation rises rapidly.”
• “No idea; what is the purpose? If they are trying to control inflation, then it might backfire.”
• “Whether it is once or thrice needs to be determined at the time.”

See more Sentiment Survey results.