Neutral sentiment among individual investors about the short-term direction of the stock market rose to its highest level in nine weeks. The latest AAII Sentiment Survey also shows an increase in bullish sentiment and lower levels of bearish sentiment.
Bullish sentiment, expectations that stock prices will rise over the next six months, increased 1.7 percentage points to 44.3%. Bullish sentiment was last lower on March 3, 2021 (40.3%). Optimism is above its historical average of 38.0% for the 23rd week out of the past 25 weeks.
Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rose 0.8 percentage points to 32.5%. Neutral sentiment was last higher on March 3, 2021 (34.4%). Neutral sentiment remains below its historical average of 31.5% for the 64th time out of the past 68 weeks.
Bearish sentiment, expectations that stock prices will fall over the next six months, declined 2.5 percentage points to 23.1%. Bearish sentiment is below its historical average of 30.5% for the 13th time this year.
At current levels, all three sentiment readings are within their typical historical ranges.
This week’s special question asked AAII members to share their thoughts about the Federal Reserve’s willingness to let inflation run moderately above 2% for a period of time without raising interest rates. Slightly more than a third of respondents (35%) said that they agree with the Federal Reserve’s decision.
This compares to 24% of respondents who said that they think this is a bad decision and that they don’t think that the Fed will be able to keep a cap on inflation once it starts climbing. About 11% of respondents said that they disagree with this decision because it hurts savers and bondholders. In addition, about 11% of respondents said that they disagree with this decision because it encourages borrowing and the excessive printing of money.
Here is a sampling of the responses:
- “I’m alright with this, I suppose I’ll take a ‘wait and see’ approach. These are unprecedented times and I think some patience is warranted.”
- “It is already over 2% for most Americans and the Fed should taper bond purchases slowly until zero at the end of year.”
- “It sounds like a logical move with the current situation.”
- “Not a good idea. It encourages too much borrowing on the part of people who really get hurt when inflation finally catches up and interest rates have to rise.”
- “Dumb idea. Only a fool believes they have the power to manage the economy.”
This week’s AAII Sentiment Survey results:
- Bullish: 44.3%, up 1.7 points
- Neutral: 32.5%, up 0.8 points
- Bearish: 23.1%, down 2.5 points
- Bullish: 38.0%
- Neutral: 31.5%
- Bearish: 30.5%
The AAII Sentiment Survey has been conducted weekly since July 1987. The survey and its results are available online.
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