AAII Sentiment Survey: Optimism Declines to a Six-Week Low

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Source: Thinkstock

Source: Thinkstock

Optimism fell to a six-week low as expectations for a flat market rebounded in the latest AAII Sentiment Survey. Pessimism stayed below average for the sixth consecutive week.

Bullish sentiment, expectations that stock prices will rise over the next six months, fell 4.6 percentage points to 36.8 percent. This is the lowest level of optimism recorded by our survey since February 6, 2014. It also ends a streak of five consecutive weeks with bullish sentiment above its historical average of 39.0 percent.

Neutral sentiment, expectations that stock prices will stay essentially unchanged, rose 5.2 percentage points to 37.1 percent. This is the 11th consecutive week with neutral sentiment above its historical average of 30.5 percent.

Bearish sentiment, expectations that stock prices will fall over the next six months, declined by 0.7 percentage points to 26.1 percent. Pessimism is below its historical average of 30.5 percent for the 24th time in 28 weeks.

The decline in bullish sentiment is not significant, especially when one considers that the level of optimism remains close to its historical average. Weakness in the stock market over the survey period may have moved some investors from the bullish camp and into the neutral camp. Bearish sentiment has not moved much over the past three weeks, fluctuating within a 0.7 percentage point range.

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 slow rate of economic expansion and Washington politics.

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