AAII Sentiment Survey, 7 December 2016

AAII Sentiment Survey, 7 December 2016

AAII Sentiment Survey, 7 December 2016

$DIA, $SPY, $QQQ

The AAII Sentiment Survey measures the percentage of individual investors who are bullish, bearish, and neutral on the stock market short term; individuals are polled from the AAII Website on a weekly basis.

Only one vote per member is accepted in each weekly voting period.

Optimism is above 40% for a 4th week running, the longest streak in nearly 2 years

Optimism among individual investors about the short-term direction of the stock market is above 40% for a 4th straight week for the 1st time in approximately years.

This week’s AAII Sentiment Survey also shows a decline in Neutral sentiment and a modest rise in Pessimism.

Bullish Sentiment

Expectations that stock prices will rise over the next 6 months, declined 0.7% to 43.1%. This marks the 4th consecutive week that Optimism is above 40% and the 5th straight week that it is above its historical average of 38.5%.

 

Neutral Sentiment

Expectations that stock prices will stay essentially unchanged over the next 6 months, declined 0.7% to 30.4%. The modest decrease puts neutral sentiment back below its historical average of 31.0%.

 

Bearish Sentiment

Expectations that stock prices will fall over the next 6 months, rose 1.4% to 26.5%.  Even with the increase, Pessimism is below its historical average of 30.5% for a 5th straigh week.

 

Bullish sentiment readings in the low to mid-40’s have been a normal occurrence throughout the history of the survey.

During most of the past 24 months, and readings above 40% have been fairly rare.

For example, the last time optimism held above 40% on 4 consecutive weeks was 25 December 2014, through 15 January 2015. In total, there have only been 14 weeks over the past 24 months with optimism at or above 40%.

The new record highs are giving individual investors encouragement and/or calming fears about a drop occurring in the short term, and the election’s outcome remains front and center for many AAII members.

Some are encouraged by possible changes President Elect Donald Trump could make, while others are uncertain or want to wait to see how his administration’s policies and their impact evolve.

There are also individual investors who are Pessimistic following the election.

Beyond the election, the direction of interest rates, the pace of economic and earnings growth, and valuations are influencing individual investors’ expectations for the stock market.

This week’s special question asked AAII members what they thought about the post-election rise in stock prices. Responses were mixed.

The largest group, about 38% of all respondents, think prices are rising on expectation of the changes President-elect Donald Trump will bring. The easing of business regulations and lower taxes were specifically mentioned.

Next, 22% think the rally is temporary, with a reversal potentially occurring during 1-H of next year.

Next, 14% think stocks have either risen too far too fast or do not believe the rally is justified by the current underlying fundamentals.

Other respondents described the rally as a reaction to the uncertainty about the election being over, are taking a wait-and-see approach or say they are surprised by The Trump Rally.

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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