AAII Sentiment Survey: Highest Level Of Neutral Sentiment In Nearly A Year

Includes: DIA, IVV, SPY, VOO, VTI
by: AAII


Bullish: 29.7%, down 2.9 percentage points.

Neutral: 43.4%, up 5.0 percentage points.

Bearish: 26.9%, down 2.1 percentage points.

The percentage of individual investors describing their outlook for stocks as neutral is at its highest level in nearly a year. The latest AAII Sentiment Survey also shows pessimism at its lowest level since the first week of January.

www.aaii.com Bullish sentiment, expectations that stock prices will rise over the next six months, declined 2.9 percentage points to 29.7%. This is a six-week low. It is also the 18th consecutive week and the 23rd time out of the last 24 weeks that bullish sentiment is below the historical average of 38.5%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, jumped by 5.0 percentage points to 43.4%. The last time neutral sentiment was this high was August 3, 2016 (also 43.4%). This week's rise keeps neutral sentiment above its historical average of 31.0% for the ninth consecutive week and the 14th out of the last 15 weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, declined 2.1 percentage points to 26.9%. Pessimism was last lower on January 4, 2017 (25.2%). The drop keeps bearish sentiment below its historical average of 30.5% for the seventh out of the last nine weeks.

At current levels, neutral sentiment is at an unusually high level (more than one standard deviation above its historical average). Optimism, though slightly below 30%, continues to remain within its typical range (albeit, near the lower end of it).

This year's record highs for the S&P 500 and the Nasdaq have encouraged some individual investors, but the Trump administration’s ability (or lack thereof) to move forward on economic and tax policy remains on the forefront of many others’ minds. Also playing a role in influencing sentiment are earnings, valuations, concerns about the possibility of a pullback in stock prices and interest rates/monetary policy.

This week’s special question asked AAII members for their current opinion of healthcare stocks. Two out of every five respondents (40%) expressed a positive opinion. Some respondents said healthcare stocks are currently attractive, while others pointed to their long-term prospects. Nearly a quarter of all respondents (24%) said they are currently uncertain or otherwise cautious about healthcare stocks. Some of these respondents directly mentioned the policy debates occurring in Washington, D.C. Almost 21% said they are negative on healthcare stocks. High valuations were listed by some, while others cited the current uncertainty.

Here is a sampling of the responses:

  • “Good if you are in it for the long run. There are so many of us old folks who will need medical care of some sort.”
  • “They will rise in the long term, but will be volatile in the short term.”
  • “Healthcare stocks will twist in the wind until Congress gets its act together on healthcare legislation.”
  • “They have run up in price too far, too fast.”
  • “Good now; need to see what Congress and the president will do.”

This week's AAII Sentiment Survey results:

  • Bullish: 29.7%, down 2.9 percentage points.
  • Neutral: 43.4%, up 5.0 percentage points.
  • Bearish: 26.9%, down 2.1 percentage points .

Historical averages:

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

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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.