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BULLISH SENTIMENT REBOUNDS

By Charles Rotblut, CFA, AAII

Bullish sentiment rebounded as bearish sentiment pulled back from unusually high levels in the latest AAII Sentiment Survey.

Bullish sentiment, expectations that stock prices will rise over the next six months, rose 6.9 percentage points to 30.5%. This is the eighth consecutive week that bullish sentiment has been below its historical average of 39%.

Neutral sentiment, expectations that stock prices will stay essentially flat over the next six months, edged up 0.4 percentage points to 30.9%. The historical average is 31%.

Bearish sentiment, expectations that stock prices will fall over the next six months, fell 7.3 percentage points to 38.7%. Even with the drop, bearish sentiment is above its historical average of 30% for the sixth time in seven weeks.

The level of pessimism declined from the unusually high readings registered during the last two weeks as the market’s downside volatility paused. Nonetheless, individual investors remain concerned about the short-term direction of stock prices. Europe and the pace of U.S. economic growthremain key concerns.

This week’s special question asked AAII members which sectors or industries they like right now. Energy was named by the largest number of respondents, followed by technology, health care, and consumer staples. When the same question was asked last February, members said they liked energy, technology and real estate [real estate investment trusts (REITs) and home building stocks].

This week’s AAII Sentiment Survey results:

  • Bullish: 30.5%, up 6.9 percentage points
  • Neutral: 30.9%, up 0.4 percentage points
  • Bearish: 38.7%, down 7.3 percentage points

Historical averages:

  • Bullish: 39%
  • Neutral: 31%
  • Bearish: 30%
(chart provided by pragcap.com)

The AAII Sentiment Survey has been conducted weekly since July 1987 and asks AAII members whether they think stock prices will rise, remain essentially flat, or fall over the next six months. The survey period runs from Thursday (12:01 a.m.) to Wednesday (11:59 p.m.). The survey and its results are available online at: https://www.aaii.com/sentimentsurvey.

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