AAII Sentiment Survey: Neutral and Bearish Sentiment Rebound

The percentages of individual investors expecting stocks to stay unchanged or decline over the next six months both rebounded in the latest AAII Sentiment Survey.

Bullish sentiment, expectations that stock prices will rise over the next six months, pulled back by 4.9 percentage points to 32.8%. Optimism remains below its historical average of 38.0% for the seventh consecutive week.

Neutral sentiment, expectations that stock prices will be unchanged over the next six months, rose 2.1 percentage points to 33.9%. Neutral sentiment is above its historical average of 31.5% for the fifth consecutive week.

Bearish sentiment, expectations that stock prices will fall over the next six months, rose 2.8 percentage points to 33.3%. Pessimism extended its streak of being at or above its historical average of 30.5% to seven consecutive weeks.

All three indicators are within their typical historical ranges

Most of the responses to this week’s survey were recorded prior to yesterday’s drop in the major market indexes.

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. The omicron variant of the coronavirus may also be playing a role. Additional factors include earnings, valuations and the Biden administration’s initiatives.

This week’s special question asked AAII members how big of a percentage gain or loss the S&P 500 index will realize in 2022. Nearly two-thirds of respondents (66%) expect to see returns greater than 2%, with 43% expecting to see returns between 6% and 15% for 2022.

Conversely, about 26% of respondents expect to see negative returns greater than 2%, with 19% predicting losses to exceed 10%. Roughly 8% of respondents predict that the returns will be flat for 2022 (between –1% and 1%).

Here is a sampling of the responses:

• I think the S&P 500 will be up over 10% this year as current fears about inflation, the coronavirus and the midterm elections fade during the year.
• Inflation, the coronavirus, supply chain, energy and government policy will lead to a double-digit loss for the S&P 500.
• I think we’ll probably end flat-to-down (–1% to –3%) in 2022. I expect earnings to still be strong, but the health and interest rate environment look to be more uncertain or even negative. I look for a strong first half and a much weaker second half.
• The Fed tapering and raising rates three times in 2022 will cause the S&P 500 to lose about 5% to 10%.
• I think we’ll see a 20% gain in the S&P 500.
• Single-digit percentages. The big tech companies have gotten ahead of themselves (just like the little tech companies) but, they have been held up because of their place in the indexes and ETFs.

See more Sentiment Survey results.