AAII Sentiment: Investor Optimism Pulls Back Following Post Election Spike

AAII Sentiment: Investor Optimism Pulls Back Following Post Election Spike

AAII Sentiment: Investor Optimism Pulls Back Following Post Election Spike


Optimism pulled back in the latest AAII Sentiment Survey after having risen significantly over the previous 3 weeks.

Both Neutral and Bearish sentiment rebounded this week, after having both fallen prior.

Bullish Sentiment

Expectations that stock prices will rise over the next 6 months, fell by 6.1% to 43.8%. The pullback follows last week’s reading of 49.9%, which was the highest mark recorded by our survey since 1 January 2015 (51.7%). Even with this week’s drop, Bullish sentiment remains above its historical average of 38.5% for a 4th week running.

Neutral Sentiment

Expectations that stock prices will stay essentially unchanged over the next 6 months, rebounded by 3.1% to 31.1%. The increase puts neutral sentiment about even with its historical average of 31.0%.

Bearish Sentiment

Expectations that stock prices will fall over the next 6 months, rose 3.0% to 25.1%. Pessimism was last lower on 17 August 2016. The increase is not large enough to prevent Pessimism from remaining below its historical average of 30.5% for a 4th straigh week.

The 1 December results follow a significant shift in sentiment.
During the 3-week period of 2 November thru 23 November 2016, optimism rose by a cumulative 26.3%, Neutral sentiment fell by a cumulative 14.0% and pessimism fell by a cumulative 12.2%.

The rise in Bullish sentiment was the 13th largest 3-week increase in the AAII survey’s 29-year history.

As I will discuss in this evening’s AAII Investor Update, on average, the S&P 500 has only been slightly positive over the six-month periods that followed the 12 previous increases in optimism (up 6 times and down 6 times).

Furthermore, unusually high weekly readings of Optimism have historically been followed by below-average returns for the S&P 500.

The average 6-month return for the S&P 500 following such readings is 2.7%.

Symbol Last Trade Date Change Open High Low Volume
NYSEArca:SPY 219.68 2 December 2016 0.11 219.67 220.25 219.26 74,840,300
HeffX-LTN Analysis for SPY: Overall Short Intermediate Long
Neutral (0.21) Neutral (0.15) Bullish (0.29) Neutral (0.19)

By Charles Rotblut,

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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