Bullish sentiment is below its historical average for the first time in 15 weeks, according to the latest AAII Sentiment Survey.
Bullish sentiment, expectations that stock prices will rise over the next six months, fell 4.3 percentage points to 38.2%. This is the lowest level of optimism recorded in the survey since December 22, 2012. It is also just the second time in the past 17 weeks 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, rose 2.0 percentage points to 34.0%. This matches the 2012 high set on January 5. It is also the second consecutive week that neutral sentiment has been above its historical average of 31%.
Bearish sentiment, expectations that stock prices will fall over the next six months, rose 2.3 percentage points to 27.8%. This is the 14th consecutive week and the 15th out of the last 16 weeks that bearish sentiment has been below its historical average of 30%.
The difference between bullish and bearish sentiment, the bull-bear spread, narrowed to 10.4 percentage points. This extends the streak of positive double-digit differentials to 14 weeks, the longest such streak since March 2004. The bull-bear spread stayed in positive double digits for 35 consecutive weeks between July 2003 and March 2004.
A combination of rising gasoline prices, worries about the European sovereign debt crisis, uncertainty about China's economy and concerns that the market's rally may be losing steam helped to reduce the level of optimism recorded in our survey. Notably, bearish sentiment has stayed fairly stable over the past four weeks, with readings of 27.2% (March 15), 27.8% (March 22), 25.5% (March 29), and now 27.8%. Continued signs of economic growth in the U.S. and the stock markets performance are giving many investors reasons to stay optimistic.
This week's special question asked AAII members if there are any catalysts they are looking for over the next several months. Responses varied, though the health and direction of the U.S. economy was cited most often. Several members said they were looking for changes in employment, housing, gasoline prices or interest rates. Other potential catalysts included a worsening of the European sovereign debt problems, a slowdown in China's economy and first-quarter earnings for U.S. companies.
This week's AAII Sentiment Survey results:
- Bullish: 38.2%; down 4.3 percentage points
- Neutral: 34.0%; up 2.0 percentage points
- Bearish: 27.8%; up 2.3 percentage points
- Bullish: 39%
- Neutral: 31%
- Bearish: 30%
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.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.