Pessimism rose to a nine-week high in the latest AAII Sentiment Survey. Neutral sentiment stayed above average for the 14th consecutive week, while optimism remained below average.
Bullish sentiment, expectations that stock prices will rise over the next six months, plunged 6.9 percentage points to 28.5%. This is the lowest level of optimism registered by our survey since February 6, 2014 (27.9%). It is also the fourth consecutive week with bullish sentiment below its historical average of 39.0%.
Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, declined 0.4 percentage points to 37.4%. Neutral sentiment is now above its historical average of 30.5% for the 14th consecutive week. This is the longest such streak since 1999 (15 weeks).
Bearish sentiment, expectations that stock prices will fall over the next six months, spiked 7.3 percentage points to 34.1%. This is the largest amount of pessimism since February 6, 2014 (36.4%). It also ends a streak of eight consecutive weeks with bearish sentiment below its historical average of 30.5%.
At current levels, bullish sentiment is right at the border of what we would consider to be a typical or an unusually low reading. The drop in optimism comes as the S&P 500 fell by 2.3% and the Nasdaq lost more than 3.7% over a two-day period.
Some AAII members are fretting about the possibility of a market pullback, elevated stock valuations, the pace of revenue growth, the slow rate of economic expansion and Washington politics. Others remain encouraged by the overall upward momentum of stock prices, earnings growth, economic expansion, the Federal Reserve's tapering of bond purchases and low interest rates.
This week's special question asked AAII members how much impact the events in Ukraine are having on their six-month outlook for stocks. Nearly two-thirds of respondents (63%) said the events were having no to very little impact on their outlook. About 11% said the events were having a little impact, while 9% said the events were having some impact. Just slightly more than 5% said the events were causing them to be more bearish.
Here is a sampling of the responses:
- "None, unless Russia becomes more aggressive."
- "Minimal at most."
- "Not much, it's just a disturbing and sad mess."
- "None at this time."
- "Some. Clearly it adds risk."
This week's AAII Sentiment Survey results:
- Bullish: 28.5%, down 6.9 percentage points
- Neutral: 37.4%, down 0.4 percentage points
- Bearish: 34.1%, up 7.3 percentage points
- 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 here.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.