AAII Sentiment Survey: Optimism Drops as Pessimism Jumps to an Eight-Week High

The results from the latest AAII Sentiment Survey show optimism about the short-term direction of the stock market falling to an eight-week low. At the same time, pessimism rose to an eight-week high.

Bullish sentiment, expectations that stock prices will rise over the next six months, dropped 5.8 percentage points to 21.9%. The pullback puts optimism back at an unusually low level. It also keeps bullish sentiment below its historical average of 38.0% for the 41st consecutive week.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, decreased 2.2 percentage points to 27.7%. Neutral sentiment is below its historical average of 31.5% for the 17th time in 19 weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, jumped 8.0 percentage points to 50.4%. Bearish sentiment is above its historical average of 30.5% for the 40th time out of the past 41 weeks and is at an unusually high level for the 25th time out of the last 33 weeks. The breakpoint between typical and unusually high readings is currently 40.5%.

The bull-bear spread (bullish minus bearish sentiment) is –28.5% and is unusually low for the 26th time in 32 weeks. The breakpoint between typical and unusually low readings is currently –10.9%. The bull-bear spread has also tied its second-longest streak of negative readings as sentiment has remained in favor of bears for the 22nd week in a row.

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 the bull-bear spread.

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, politics and the ongoing invasion of Ukraine by Russia.

See more Sentiment Survey results.