AAII Sentiment Survey: Pessimism Rises As Neutral And Bullish Sentiments Fall

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by: AAII

Summary

After two weeks of decline, bearish sentiment bounced back up.

Neutral and bullish sentiments both declined compared to last week.

The markets' lack of downward volatility has led 43% of surveyed investors to a more bearish six-month outlook.

Pessimism bounced back after two weeks of declining, according to the latest AAII Sentiment Survey. At the same time, neutral and bullish sentiment declined compared to last week.

Bullish sentiment, expectations that stock prices will rise over the next six months, fell 5.1 percentage points to 30.2%. The historical average is 38.5%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, fell 1.8 percentage points to 32.4%. Despite the weekly decline, neutral sentiment remains above its historical average of 31.0% for the second consecutive week.

Bearish sentiment, expectations that stock prices will fall over the next six months, rose 6.9 percentage points to 37.4%. The increase pushed bearish sentiment back up above its historical average of 30.5%.

Since the beginning of the year, bullish sentiment has declined 16.0 percentage points, while neutral sentiment has risen 3.8 percentage points and bearish sentiment has risen 12.2 percentage points over the same time period. Both neutral and bearish sentiments remain above their historical average, while bullish sentiment remains below its historical average.

Markets dipped slightly over the last week as investors began to question President Trump's ability to move forward with promised legislation. The doubt was sparked after House Republicans failed to vote on a replacement for the Affordable Care Act (aka. Obamacare) - Trump's first attempt to pass major legislation since being elected. Much of the market momentum since Election Day has been due to hopes that a new administration would enact policies favorable to the corporate environment and spur economic growth.

Last week's special question asked AAII members how the market's relative lack of downward volatility this year (just one day with a decline of greater than 1% through March 22) has affected their sentiment toward stocks. Forty-three percent of respondents said that the lack of downward volatility has made them more bearish in regards to their market outlook, while 38% were uncertain or neutral and 19% were bullish.

Here is a sampling of the responses:

  • "A large correction is very likely in the coming months and is the reason that I am currently neutral over the next six months rather than bullish. Bullish is my current long-term position, however."
  • "Facts show that it is bullish despite popular belief."
  • "It has not affected my outlook at all, I look for long-term value."
  • "It all depends on Washington. I expect that Washington will not deliver all the market has priced in."
  • "I'm more reluctant to invest, taking small amounts of profits for buying on larger declines."

This week's AAII Sentiment Survey results:

  • Bullish: 30.2%, down 5.1 percentage points
  • Neutral: 32.4%, down 1.8 percentage points
  • Bearish: 37.4%, up 6.9 percentage points

Historical averages:

  • Bullish: 38.5%
  • Neutral: 31.0%
  • Bearish: 30.5%

The AAII Sentiment Survey has been conducted weekly since July 1987. The survey and its results are available online.

Disclosure: I/we 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.