The AAII Sentiment Survey for the Frame Ended 25 May 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,
Individual members 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 18 May 2016
Data represents what direction members feel the stock market will be in the next 6 months.
This week’s AAII Survey results, as follows:
Bullish: 17.8%, -1.6 pts
Neutral: 52.9%, + 6.3 pts
Bearish: 29.4%, – 4.7 pts
The percentage of individual investors Optimistic about short-term gains occurring in the stock market is at its lowest level in 11 years. And the percentage of investors describing their outlook as Neutral is at its highest level in 16 years, that according to the latest AAII Sentiment Survey.
Expectations that stock prices will rise over the next 6 months, declined 1.6% to 17.8%. This is the lowest level of Optimism recorded by our survey since 14 April 2005 (16.5%). It is also the 29th week running and the 62nd out of the past 64 weeks that Bullish sentiment has been below its historical average of 39.0%.
Expectations that stock prices will stay essentially unchanged over the next 6 months, rose 6.3% to 52.9%. Neutral sentiment was last higher on 12 April 1990 (56.0%). Neutral sentiment has now been above 40% for 12 weeks running, and above its historical average of 31% for 17 straight weeks, as well as for 69 out of the past 73 weeks.
Expectations that stock prices will fall over the next 6 months, fell 4.7% to 29.4%. The historical average is 30%.
Since the AAII Sentiment Survey started in June 1987, a Neutral sentiment reading above 50% has only been recorded 28 times. Just 6 of those readings were recorded after Y 1989 (January 1991, July 1991, August 1994, February 2003, December 2015 and this week).
The remaining 22 readings are all from the approximate 2-year span of December 1987 through October 1989.
On average, the S&P 500’s 26 and 52-week returns following such occurrences were 8.4% and 20.5%, respectively.
Even rarer is having Bullish sentiment below 20% and Neutral above 50% in the same week. This week is just the 6th time such a combination has occurred. It previously happened 4X in Y 1988 and once in Y 1989. On average, the S&P 500’s 26- and 52-week returns following those 5 occurrences were 11.2% and 25.7%, respectively.
Thursday morning the AAII bloggers posted a table showing every occurrence neutral sentiment was above 50% and the market’s subsequent returns, as well as a table showing the six weeks with bullish sentiment below 20% and neutral sentiment above 50%.
In addition, last week AAII published a listing of the previous 30 sub-20% bullish sentiment readings and the S&P 500’s subsequent returns. Keep the small sample size and the dates of those readings (especially with Neutral sentiment) in mind when reviewing the data.
Giving individual investors cause for concern is the slow pace of US economic growth and uncertain global economic growth, terrorism and global unrest, lackluster corporate earnings, the prevailing level of valuations, the forthcoming election and monetary policy.
Some AAII members, however, are encouraged by sustained domestic economic growth, corporate earnings and still comparatively low energy prices.
This week’s special question asked AAII members how first-quarter earnings have influenced their outlook for stock prices.
- 27% said that Quarterly results have not altered their outlook. Many said they do not alter their expectations based on Quarterly results, while several others pointed to other factors (namely the November elections and monetary policy) as having a larger impact.
- 22% viewed Q-1 earnings as not being good or supportive of current stock prices.
- 5% of respondents feel more positive in reaction to Q-1 earnings.
- 7% of respondents described their outlooks as Pessimistic without mentioning earnings.
- Some others described market volatility and the upcoming presidential election as impacting their outlook.
By Charles Rotblut, CFA
Paul Ebeling, Editor