AAII Sentiment Survey: Bullish and Neutral Sentiment Stay Above Average​

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Both bullish sentiment and neutral sentiment extended their streaks of above average readings in the latest AAII Sentiment Survey. Bearish sentiment increased slightly, but continues to stay below its historical average. Bullish sentiment, expectations that stock prices will rise over the next six months, increased 0.8 percentage points to 41.3 percent. Optimism has now been above its historical average of 39.0 percent for five consecutive weeks.

Neutral sentiment, expectations that stock prices will stay essentially unchanged, declined 1.0 percentage points to 31.8 percent. Although this is the second consecutive weekly drop, neutral sentiment remains above its historical average of 30.5 percent for the 10th consecutive week. Bearish sentiment, expectations that stock prices will fall over the next six months, edged up 0.2 percentage points to 26.8 percent. Even with the increase, pessimism remains below its historical average of 30.5 percent for the 23rd time in 27 weeks.

As the numbers show, the trend of cautious optimism and above-average neutral sentiment among individual investors continues. Many AAII members are encouraged by the overall upward momentum of stock prices, earnings growth, economic expansion, the Federal Reserve’s tapering of bond purchases and low interest rates. Some AAII members are fretting about elevated stock valuations, the pace of revenue growth, the pace of economic expansion and Washington politics.

This week’s special question asked AAII members to predict the odds of the current bull market lasting into at least a sixth year on a scale of “very likely” to “very unlikely.” Respondents were optimistic overall with 34 percent saying the chances of the bull market celebrating its sixth birthday were somewhat likely, 16 percent saying likely, and 24 percent saying very likely. Economic growth was the primary reason given. Many respondents also said the sustained low interest rates and the accommodative Federal Reserve policy will help stocks move higher. Less than 15 percent of respondents do not expect the bull market to reach a sixth year (7 percent said somewhat unlikely, 5 percent said unlikely, and 2 percent said very unlikely.) Valuations and underlying fundamentals were the top reasons given for the pessimism.

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