The AAII Sentiment Survey for the Frame Ended 20 April 2016

The AAII Sentiment Survey for the Frame Ended 20 April 2016

The AAII Sentiment Survey for the Frame Ended 20 April 2016

The AAII Investor Sentiment Survey measures the percentage of individual investors who are Bullish, Bearish, and Neutral on the stock market for the next 6 months; individuals are polled from the ranks of the AAII membership weekly. Just 1 vote per member is accepted in each weekly voting frame.

Survey Results for frame Ended 20 April 2016

Data represents what direction members feel the stock market will be in the next 6 months.

This week’s AAII Sentiment Survey results:

Bullish: 33.4%, +5.6 pts
Neutral: 42.7%, – 4.6 pts
Bearish: 23.9%, – 1.0 pt

Historical averages:

Bullish: 39.0%
Neutral: 31.0%
Bearish: 30.0%

Commentary

For just the 3rd time in the past 23 weeks, at least 33% of individual investors say they are Optimistic about the short-term direction of stock prices, according to the latest AAII Sentiment Survey.

Neutral sentiment is above 40% for a 6th week running

Bullish sentiment

Bullish expectations that stock prices will rise over the next 6 months, rebounded by 5.6 pts to 33.4%. This is a 5-week high. Even with the rebound, Optimism is below its historical average of 39.0% for the 24th straight week and the 57th out of the past 59 weeks.

Neutral sentiment

Neutral expectations that stock prices will stay essentially unchanged over the next 6 months, fell 4.6 pts to 42.7%. As noted above, this is the 6th consecutive week that Neutral sentiment is above 40%, the longest such streak since a 16-wk stretch between 9 April and 15 July 2015. This is the also the 12th straight week and the 64th out of the past 68 weeks with a Neutral sentiment reading above its historical average of 31.0%.

Bearish sentiment

Bearish expectations that stock prices will fall over the next 6 months, declined 1.0 pt to 23.9%. The decrease keeps Pessimism below its historical average of 30.0% for an 8th week running.

Even though the S&P 500 index is trading near its record high and the smaller-cap Russell 2000 index has rebounded, many individual investors are cautious.

Optimism has mostly stayed below its historical average over the past 60 weeks. Even this week’s reading was only the 3rd time that Bullish sentiment has exceeded 33% since last November. When the S&P 500 set its last record closing high on 21 May 2015, just 25.2% of surveyed individual investors described their outlook as Bullish.

What is  giving individual investors cause for concern now is the slow pace of US economic growth and uncertain global economic growth, terrorism and global unrest, lackluster corporate earnings and the prevailing level of valuations.

Some AAII members are encouraged by sustained domestic economic growth, expected corporate earnings growth and still-low energy prices.

This week’s special question asked AAII members what their comfort level is with the current valuations of stocks.

26% view stock prices as being overvalued.

22% said that they are either uncomfortable with current valuations or that stocks are somewhat overvalued. The lack of adequate earnings to support current prices was the most common reason given as to why, followed by a lack of sufficient earnings growth.

About 14% of respondents said they are comfortable with the current level of valuations.

And about 8% of respondents said that stocks are fairly valued now.

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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