AAII Sentiment Survey: Optimism Continues to Hover Above Its Historical Average

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Optimism about the short-term direction of stock prices stayed slightly above its historical average for the fourth consecutive week in the latest AAII Sentiment Survey. Pessimism rebounded, but remains below its historical average.

Bullish sentiment, expectations that stock prices will rise over the next six months, increased 0.8 percentage points to 40.5 percent. The historical average is 39.0 percent.

Neutral sentiment, expectations that stock prices will stay essentially unchanged, fell 6.3 percentage points to 32.9 percent. Even with the drop, this is the ninth consecutive week with a neutral sentiment reading above its historical average of 30.5 percent.

Bearish sentiment, expectations that stock prices will fall over the next six months, rebounded by 5.5 percentage points to 26.6 percent. The increase was not large enough to prevent pessimism from being below its historical average of 30.5 percent for the 22nd time in 26 weeks, however.

Only two other periods with pessimism staying below its historical average have existed over the past 10 years. The first was a 20-week span between August 19, 2004 and December 30, 2004 with 16 weeks of pessimism below 30.5 percent. The second was a 23-week span between September 16, 2010 and February 17, 2011 with 20 weeks of pessimism below 30.5 percent.

When looking at the current trends in individual investor sentiment, it is important to note the lack of high levels of optimism. Although pessimism has mostly been stayed below average over the past six months, bullish sentiment among AAII members — in aggregate — has mostly been levels we would not consider to be enthusiastic.

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