AAII Sentiment Survey: Bullish Sentiment Rises To A Two-Month High

Summary

• Bullish: 43.4%, up 3.9 percentage points.
• Neutral: 23.2%, down 4.2 percentage points.
• Bearish: 33.3%, up 0.4 percentage points.

Optimism among individual investors about the short-term direction of the stock market rose to a two-month high. In addition, the percentage of individual investors describing their outlook for stocks as “neutral” continued to fall.

Bullish sentiment, expectations that stock prices will rise over the next six months, increased by 3.9 percentage points to 43.4%. Optimism was last higher on July 1, 2021 (48.6%). This is the second time in the last eight weeks that optimism is above the historical average of 38.0%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, fell by 4.2 percentage points to 23.2%. Neutral sentiment was last lower on April 15, 2021 (21.5%). The historical average is 31.5%.

Bearish sentiment, expectations that stock prices will fall over the next six months, rose by 0.4 percentage points to 33.3%. This is the fifth consecutive week that pessimism is above its historical average of 30.5%.

Neutral sentiment is almost at the bottom of its typical historical range. Optimism and pessimism are within their typical historical ranges.

The return to normalcy from the coronavirus pandemic, monetary and fiscal stimulus and inflationary pressures are influencing individual investors’ outlook for stocks. Other factors include earnings, valuations and the Biden administration’s initiatives.

In this week’s special question, we asked AAII members to share their thoughts about second-quarter earnings.

Close to half of respondents (44%) are encouraged by the earnings reports, seeing it as a sign of better things to come amid market uncertainty. This compares to 21% of respondents who say they feel more cautious or uncertain of the results. Many of these respondents note that comparing this year’s results to the second quarter of 2020 isn’t fair, since the year-ago period was the height of the coronavirus pandemic. Respondents in this category say more data and time are needed to make a more solid conclusion. About 17% of responses convey negative sentiment about the results, citing inflation as a reason why some earnings were especially high. In addition, 8% of respondents express that second-quarter earnings simply met their expectations. Finally, 6% of respondents are neutral about this quarter’s earnings results since they are long-term investors.

Here is a sampling of the responses:

• “They look good and probably will get better as the economy improves, especially if the delta variant is brought under control.”
• “Comparisons to second-quarter 2020 were meaningless, but against 2019 they were very good. I think job turnover was a big factor, which suggests future higher cost and inflation.”
• “Companies should generally be able to meet/beat these numbers but the third quarter and fourth quarter will be much more difficult and the market will go sideways/down into early 2022.”
• “As we continue to get out of the pandemic, more and more people return to normal activities, which allows consumption to reach higher levels. This is no surprise for me.”
• “I don’t care quarter to quarter. I’m long-term.”

This week’s AAII Sentiment Survey results:

• Bullish: 43.4%, up 3.9 percentage points
• Neutral: 23.2%, down 4.2 percentage points
• Bearish: 33.3%, up 0.4 percentage points

Historical averages:

• 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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