AAII Sentiment Survey: Optimism Falls and Pessimism Rises to Near Historic Levels

The percentage of individual investors expressing optimism about the short-term direction of stocks fell to among the lowest levels ever recorded in the AAII Sentiment Survey. At the same time, pessimism rose to one of its highest levels ever recorded.

Bullish sentiment, expectations that stock prices will rise over the next six months, declined 1.2 percentage points to 18.2%. This is a two-month low. Optimism was last lower on April 28, 2022 (16.4%). Bullish sentiment is below its historical average of 38.0% for the 31st consecutive week and at an unusually low level for the 18th time in 22 weeks.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, increased 0.2 percentage points to 22.5%. Neutral sentiment is below its historical average of 31.5% for the eighth time in nine weeks. It is also at an unusually low level for the third time in eight weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, rose a full percentage point to 59.3%. This is an eight-week high. Pessimism was last higher on April 28, 2022 (59.4%). Bearish sentiment is above its historical average of 30.5% for the 30th time out of the past 31 weeks and at an unusually high level for the 11th time in 13 weeks.

The bull-bear spread (bullish minus bearish sentiment) is –41.1% and is unusually low for the 21st time in 24 weeks.

This week’s bullish sentiment reading is the 25th lowest in the survey’s history. This week’s bearish sentiment reading is the sixth highest ever recorded. This week’s bull-bear spread is the seventh most negative ever recorded. (The weekly AAII Sentiment Survey started in July 1987.)

Historically, the S&P 500 index has gone on to realize above-average and above-median returns during the six- and 12-month periods following unusually low readings for bullish sentiment and for the bull-bear spread. Unusually high bearish sentiment readings historically have also been followed by above-average and above-median six-month returns in the S&P 500. The S&P 500 has underperformed following periods of below-average neutral sentiment, though the link is weaker.

Continued volatility in the major stock indexes along with inflation, corporate earnings and increased chatter about the possibility of a recession are all likely weighing on individual investors’ short-term expectations for the stock market. Also influencing sentiment are monetary policy, the coronavirus pandemic, politics and the ongoing invasion of Ukraine by Russia.

See more Sentiment Survey results.