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By Charles Rotblut, CFA, AAII

Bullish sentiment edged up slightly and bearish sentiment declined slightly in the latest AAII Sentiment Survey.

Bullish sentiment, expectations that stock prices will rise over the next six months, increased 0.8 percentage points to 44.5%. This is the 10th consecutive week and the 11th out of the last 12 that bullish sentiment has been above its historical average of 39%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, declined 0.1 percentage points to 28.7%. This is the fourth consecutive week that neutral sentiment has been below its historical average of 31%.

Bearish sentiment, expectations that stock prices will fall over the next six months, fell 0.7 percentage points to 26.8%. This is the ninth consecutive week and the 10th out of the last 11 that bearish sentiment has been below its historical average of 30%.

This is the longest streak of above-average bullish sentiment since 2011, when optimism stayed above average for 24 weeks between September 9, 2010 and February 17, 2011. The S&P 500 increased by approximately 22% over that period.

Individual investor optimism continues to be aided by signs of improving economic conditions, as well as rising stock prices. Europe’s sovereign debt problems, slow economic growth, Washington politics and rising gasoline prices are keeping bullish sentiment from being extraordinarily high.

This week’s special question asked AAII members if the rise in oil prices is currently affecting their sentiment or if there is a price where it would do so. The majority of respondents said that oil prices would impact their sentiment if prices kept rising. Specifically, many respondents said oil above $120 per barrel or gasoline above $4 a gallon would be a cause for concern.

Here is a sampling of the responses:

  • “Not yet. Gas prices over $3.85 a gallon would change my opinion.”
  • “Yes, if higher oil prices result in an average cost of gasoline increasing to over $4.50 a gallon.”
  • “The current price is not impacting my sentiment. If oil reached $125 per barrel, it would make me even more bearish.”
  • “The prediction of $5 per gallon of gasoline by summer does impact my sentiment.”
  • “Yes. Every dollar that goes into the tank is not spent, saved or invested elsewhere. It is equivalent to a huge tax hike, greatly affecting those who least can afford it.”

This week’s AAII Sentiment Survey results:

  • Bullish: 44.5%, up 0.8 percentage points
  • Neutral: 28.7%, down 0.1 percentage points
  • Bearish: 26.8%, down 0.7 percentage points

Historical averages:

  • Bullish: 39%
  • Neutral: 31%
  • Bearish: 30%