$DIA, $SPY, $QQQ, $VXX
The AAII Investor Sentiment Survey measures the percentage of individual investors who are Bullish, Bearish, and Neutral on the US stock market for the next 6 months,
The AAII Investor Sentiment Survey has become a widely followed measure of the mood of individual investors. The weekly survey results are published in financial publications and are widely followed by market strategists, investment newsletter writers and other financial professionals.
Data represents what direction members feel the stock market will be in next 6 months.
Investor Update: Pessimism rose to its highest level since last June, while Neutral sentiment fell to a level not seen since last February.
This week’s results
Bullish: 27.9%, -1.8 points
Neutral: 36.1%, – 5.6 points
Bearish: 35.9%, + 7.4 points
Pessimism rose to a 3-month high as more than 33% of individual investors described their short-term outlook as Bearish in the latest AAII Sentiment Survey.
Neutral sentiment fell to its lowest level since February. Bullish sentiment was also lower.
Expectations that stock prices will rise over the next 6 months, fell 1.8% to 27.9%. The decline puts optimism at its lowest level since 22 June 2016 (22.0%). The decline has Bullish sentiment below its historical average of 38.5% for the 78th week out of the past 80.
Expectations that stock prices will stay essentially unchanged over the next 6 months, dove 5.6% to 36.1%. Neutral sentiment was last lower on 17 February 2016 (32.1%). Neutral sentiment remains above its historical average of 31.0% for the 33rd week running.
Expectations that stock prices will fall over the next 6 months, rose 7.4% to 35.9%. Pessimism was last higher on 15 July 2016 (37.5%). This week’s rise puts Bearish sentiment above its historical average of 30.5% for the 2nd time in 3 weeks.
Though this week’s Neutral and Bearish sentiment readings are well within their typical historical ranges, both are unusual relative to what we’ve seen throughout this calendar year.
This week’s Neutral sentiment is the 5th-lowest reading recorded this year, and pessimism is at its 8th-highest mark for the year. The 4 lower Neutral sentiment readings and 6 of the 7 higher pessimism readings occurred near the start of this year, in January and February.
The shift in sentiment happened as both large-cap and small-cap stocks experienced recent Southside volatility.
Some AAII members have previously expressed concern about valuations or the potential for a decline occurring. Also keeping some individual investors Bearish, or at least giving them reason to be cautious, are global economic uncertainty and disappointment with corporate earnings growth.
The US Presidential election continues to be brought up in responses to our weekly special questions. Giving other individual investors reason for optimism are this Summer’s rise in stock prices, the perceived lack of investment alternatives, corporate earnings and slow, economic growth.
This week’s special question asked AAII members what they thought about the NASDAQ setting a record high last week.
Responses were mixed.
- 21% thought the new record high was a positive event.
- 5% said the record high was expected to eventually happen.
- 21% of respondents described the record as a sign that the market has risen too much, is overvalued or is otherwise due for a fall.
- 5% of expressed cautiousness about the stock market.
- 13% said the record high has not impacted their outlook or investing strategy.
By Charles Rotblut, CFA
Paul Ebeling, Editor