AAII Sentiment Survey: Optimism Pulls Back Closer to Historical Lows

The results from the latest AAII Sentiment Survey show optimism falling and continuing to stay unusually low. This week’s bullish sentiment reading is among the 60 lowest readings in the survey’s history. Pessimism rose slightly after falling below 60% last week but continues to be unusually high.

Bullish sentiment, expectations that stock prices will rise over the next six months, decreased 3.6 percentage points to 20.4%. Optimism is below its historical average of 38.0% for the 47th consecutive week. It is also unusually low for the seventh consecutive week and the 30th time in 41 weeks. The breakpoint between typical and unusually low readings is currently 27.6%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rebounded by 2.4 percentage points to 23.7%. Neutral sentiment is below its historical average of 31.5% for the 23rd time in 25 weeks. The breakpoint between typical and unusually low readings is 23.1%.

Bearish sentiment, expectations that stock prices will fall over the next six months, rose 1.2 percentage points to 55.9%. Pessimism is above its historical average of 30.5% for the 46th time out of the past 47 weeks and is at an unusually high level for the 31st time out of the last 39 weeks. The breakpoint between typical and unusually high readings is currently 40.7%.

The bull-bear spread (bullish minus bearish sentiment) is –35.6% and is unusually low for the 32nd time in 38 weeks. This week’s reading ranks among the most negative in the survey’s history. The breakpoint between typical and unusually low readings is currently –11.0%.

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 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, politics and the ongoing invasion of Ukraine by Russia.

See more Sentiment Survey results.