Equal numbers of individual investors described themselves as bullish or bearish about the short-term outlook for stocks in the latest AAII Sentiment Survey.
Bullish sentiment, expectations that stock prices will rise over the next six months, fell 1.7 percentage points to 33.1%. This puts optimism at a five-week low. The historical average is 39%.
Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rose 1.2 percentage points to 33.9%. This is the sixth consecutive week and the 10th out of the past 12 weeks that neutral sentiment has been above its historical average of 31%.
Bearish sentiment, expectations that stock prices will fall over the next six months, edged up 0.4 percentage points to 33.1%. This puts pessimism at a five-week high. It also puts bearish sentiment above its historical average of 30% for the second consecutive week.
It is unusual to see bullish and bearish sentiment evenly matched. The last time this occurred was on May 13, 2010. The current split reflects the mixed signals and ongoing uncertainty individual investors are seeing. Though domestic economic data is signaling continued growth and stocks are holding onto their summer gains, concerns about slowing global economic growth, Washington politics and the European sovereign debt crisis are not going away.
This week's special question asked AAII members how their six-to-12 month outlook for U.S. economic growth has changed from last fall. Respondents were split. The largest number of AAII members said their economic outlook has worsened, but this group only slightly outnumbered the groups of individual investors who said their outlook has improved or those who said their outlook remains unchanged. Many members said they were withholding giving an opinion until after the November elections or predicated their answer based on which candidate wins the presidential election.
Here is a sampling of the responses:
- "My outlook is down from bullish to neutral. The fiscal cliff and uncertainty about where the politicians will take us is of serious concern."
- "I see a slight decline in economic activity due to the uncertainty surrounding the election and the problems in Europe."
- "Somewhat more positive, but the economy will still grow at a slow pace."
- "I'm more cautiously optimistic than last fall."
- "The election will be a major factor."
This week's AAII Sentiment Survey results:
- Bullish: 33.1%, down 1.7 percentage points
- Neutral: 33.9%, up 1.2 percentage points
- Bearish: 33.1%, up 0.4 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.
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.