Bullish sentiment pulled back, but remained at higher-than-average levels in the latest AAII Sentiment Survey.
Bullish sentiment, expectations that stock prices will rise over the next six months, fell 4.3 percentage points to 48.0%. The decline puts optimism back within the typical range of readings we have seen throughout the survey's history. Bullish sentiment is now above its historical average of 39% for the ninth time in the past 10 weeks.
Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rebounded by 4.3 percentage points to 27.7%. Even with the improvement, neutral sentiment is below its historical average of 30.5% for the 16th consecutive week and the 18th time in 20 weeks.
Bearish sentiment, expectations that stock prices will fall over the next six months, was unchanged at 24.3%. This is the seventh time in eight weeks that bearish sentiment is below its historical average of 30.5%.
As noted above, bullish sentiment declined from last week's unusually high reading to within its typical historical range of 28% to 49%. Bearish sentiment, meanwhile, stayed within its typical historical range of 20% to 41%, even though it remains at its lowest level since February 9, 2012. The strong January performance by stocks, action by Congress to avert the fiscal cliff and raise the debt ceiling (at least temporarily), continued economic growth, better-than-forecast fourth-quarter earnings and seasonality are all contributing to individual investors' optimistic moods.
This week's special question asked AAII members how they perceived the strength or weakness of the job market. Responses were mixed, with approximately 40% of respondents saying the job market was improving or at least showing signs of gradual improvement, 32% of respondents describing the job market as weak and 13% describing the recovery as being slow or too slow.
Here is a sampling of the responses:
- "The job market seems to be getting slowly better. It may not be ideal, but slow growth is what we have."
- "Gradual overall strength, but the job market is weighted down by the overall federal financial situation."
- "The job market is weak, but getting less weak."
- "I believe that the perception is that the job market is slowly improving. I do not see this as the reality, only the perception."
- "It's good to be solidly retired!"
This week's AAII Sentiment Survey Results:
- Bullish: 48.0%, down 4.3 percentage points
- Neutral: 27.7%, up 4.3 percentage points
- Bearish: 24.3%, unchanged
- Bullish: 39.0%
- Neutral: 30.6%
- Bearish: 30.6%
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: http://www.aaii.com/sentimentsurvey
Charles Rotblut. CFA is a Vice President with the American Association of Individual Investors and editor of the AAII Journal.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.