The AAII Sentiment Survey for the Frame Ended 31 August 2016
$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 above 30% for the 1st time in 9 weeks, Optimism fell.
This week’s results
Bullish: 28.6%, -0.8 points
Neutral: 39.9%, -1.1 points
Bearish: 31.5%, + 1.9 points
Pessimism among individual investors about the short-term direction of the market is above 30% for the 1st time in 9 weeks, according to the latest AAII Sentiment Survey.
Optimism and Neutral sentiment, meanwhile, are both slightly lower.
Expectations that stock prices will rise over the next 6 months, declined 0.8% to 28.6%. Optimism was last lower on 22 June 2016 (22.0%). This is the 76th week out of the past 78 that optimism is below its historical average of 38.5%.
Expectations that stock prices will stay essentially unchanged over the next 6 months, pulled back by 1.1% to 39.9%. Even with the decline, this is the 31st week running that Neutral sentiment is above its historical average of 31.0%.
Expectations that stock prices will fall over the next 6 months, rose 1.9% to 31.5%. Pessimism was last higher on 29 June 2016 (33.4%). This week’s increase is not large enough to prevent Bearish sentiment from staying below its historical average of 30.5% for a 9th straight week.
Optimism has now pulled back by a cumulative 7.0% since rising to its 3rd-highest mark of the year at 35.6% 2 weeks ago. Over the same frame, Pessimism has rebounded by 5.2%.
Beyond the current stabilization of market prices following this Summer’s rally, there has not been any new events to sway individual investors’ sentiment in one way or the other over the past 2 weeks.
Many individual investors continue to express concerns about valuations and/or are awaiting the outcome of the US Presidential election.
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.
Giving other individual investors reason for optimism are this Summer’s upward movement in stock prices, the perceived lack of investment alternatives, corporate earnings and anemic economic growth.
This week’s special question asked AAII members what they thought about the low level of volatility that has existed over the past several weeks.
The responses were mixed.
- Nearly 17% described the low level of volatility as being normal for this time of year, and being attributable to the Summer doldrums and/or vacations.
- Approximately 16% expect the markets to become more volatile soon, with some of these respondents believing that the jump in volatility will be event-driven.
- The Presidential election was cited as reason for the low volatility by 15% of respondents.
- Slightly less than 18.5% of respondents are unsure about when volatility will return, describe investors and traders as being unsure about where the market is headed or think the market is currently stagnant.
- About 7% of respondents say they like the low level of volatility.
By Charles Rotblut, CFA
Paul Ebeling, Editor