AAII Sentiment Survey, Optimism Now at a 4-Wk Low

AAII Sentiment Survey, Optimism Now at a 4-Wk Low

AAII Sentiment Survey, Optimism Now at a 4-Wk Low

$DIA, $SPY, $QQQ, $VXX

The AAII Sentiment Survey has been conducted weekly since July 1987 and asks AAII members whether they think stock prices will rise, remain essentially flat or fall over the next 6 months.

The weekly survey frame runs from Thursday at 12:01a to Wednesday at 11:59p.

AAII Investor Update

Optimism fell to 22.0%, a 4-week low. Since the start of this year, Bullish sentiment has only exceeded 30% 7X.

This Week’s Results

Bullish: 22.0%, -3.4 pts
Neutral: 42.8%, + 5.7 pts
Bearish: 35.2%, – 2.3 pts

Historical Averages

Bullish: 38.5%
Neutral: 31%
Bearish: 30.5%

Commentary

The number of individual investors expecting stock prices to rise over the short term is at a 4-week low, according to the latest AAII Sentiment Survey. Neutral sentiment rebounded strongly, Pessimism pulled back some.

Bullish Sentiment

Expectations that stock prices will rise over the next 6 months, fell 3.4% to 22.0%. Optimism was last lower on 25 May 2016 (17.8%).  The decline makes this the 8th time in 9 weeks that fewer than 3 out of 10 survey respondents are Optimistic. It is also the 33rd week running and the 66th out of the past 68 weeks with Bullish sentiment below its historical average of 38.5%.

Neutral Sentiment

Expectations that stock prices will stay essentially unchanged over the next 6 months, rebounded by 5.7% to 42.8%. The rise follows last week’s 4-month low. The increase keeps Neutral sentiment above its historical average of 31.0% for the 21st straight week.

Bearish Sentiment

Expectations that stock prices will fall over the next 6 months, declined 2.3% to 35.2%. The drop follows last week’s 4-month high, but is small enough to keep Pessimism above its historical average of 30.5% on consecutive weeks for just the 2nd time since February.

Uncertainty and lack of Optimism continue to be trends suggested by the weekly survey.

More than 4 out of 10 individual investors have described their short-term market outlook as “Neutral” during 14 out of the 1st 25 weeks of this year. At the same time, optimism has only exceeded 30% just 7Xthis year.

Giving individual investors cause for concern is the slow pace of US economic growth and uncertain pace of global economic growth, terrorism and global unrest, lackluster corporate earnings, the prevailing level of valuations, the forthcoming November elections and monetary policy.

Some AAII members are encouraged by sustained domestic economic growth, corporate earnings and the proximity of stock prices to their record highs.

This week’s special question asked AAII members whether the FOMC was correct in keeping interest rates unchanged at its June meeting. More than half of respondents (56%) said the Fed was correct not to raise rates.

Slow domestic economic growth and global uncertainty including Thursday’s Brexit ‘Leave” vote were the primary reasons why.

34% disagreed, saying the Fed should have raised rates. Many of these members think rates should be moved back to more normal levels and/or that ongoing monetary policy is hurting savers.

By Charles Rotblut, CFA

AAII Journal

Paul Ebeling, Editor

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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