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Bulls outnumbered bears by a 2:1 margin as record high prices helped to keep individual investors optimistic, according to the latest AAII Sentiment Survey. At the same time, neutral sentiment extended its streak of above average-readings to the longest period in 14 years.

Bullish sentiment, expectations that stock prices will rise over the next six months, fell 2.6 percentage points to 45.1%. Nonetheless, this is the fourth consecutive week optimism is above 40%. The historical average is 39%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged, rose 1.3 percentage points to 32.3%, the first increase in four weeks. Neutral sentiment is above its historical average of 30.5% for the ninth consecutive week, the longest such streak since July 29 to November 4, 1999, when it stayed above the mark for 15 consecutive weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, rose 1.3 percentage points to 22.6%. This is the fifth time in six weeks that pessimism has been below its historical average of 30.5%.

The recent, new record highs set by the Dow Jones industrial average and the S&P 500 is trading at continues to keep many individual investors optimistic. Yet, it remains somewhat of a cautious optimism as can be seen by the level of neutral sentiment, which is above its historical average for the 15th time in 18 weeks. Some AAII members are encouraged by signs of continued economic growth and the length of the current rally. Others, however, are concerned about prevailing valuations, the slow pace of economic growth, interest rate uncertainty and a lack of progress on key issues by Washington politicians.

This week's special question asked AAII members what factors are most influencing their six-month outlook for stocks. The domestic economy was named by 24% of respondents, though views were split between those who saw sustained growth and those who saw slow or slowing growth. Coming in as a close second was monetary policy, with 22% of respondents citing the Federal Reserve and its stimulus program. Corporate earnings ranked third, named by 20% of respondents, followed by frustration with Washington D.C. politics (16%) and the global economy, particularly China and Europe (16%). Since respondents could list more than one factor, the numbers exceed 100%.

This week's AAII Sentiment Survey results:

  • Bullish: 45.1%, down 2.6 percentage points
  • Neutral: 32.3%, up 1.3 percentage points
  • Bearish: 22.6%, up 1.3 percentage points

Historical averages:

  • Bullish: 39.0%
  • Neutral: 30.5%
  • Bearish: 30.5%

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

Source: AAII Sentiment Survey: Bulls Outnumber Bears By A 2:1 Margin