AAII Sentiment Survey: This Event Scared Investors

For the week ending December 27, 2012, bullish sentiment slipped a bit off if its near-2012 high, as investors waited to see if Congress and the president were going to come to some agreement on spending and taxes to avoid the fiscal cliff. However, bearish sentiment rose for the first time in four weeks.

While a last-minute agreement was reached late New Year’s Eve, investors had little time to digest its ramifications for this week’s survey. As a result, bullish sentiment fell to its lowest level in six weeks in the latest AAII Sentiment Survey. Bearish sentiment rose for the first time in four weeks, also to a six-week high.

Bullish sentiment, expectations that stock prices will rise over the next six months, fell 5.7 percentage points to 38.7%. This is the lowest level of optimism registered by our survey since November 22, 2012. It is also the first time in six weeks that bullish sentiment fell below its historical average of 39%.

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Neutral sentiment, expectations that stock prices will stay essentially unchanged, dipped 0.3 percentage points to 25.1%. This marked the 12th consecutive week that neutral sentiment was below its historical average of 30.6%.

Bearish sentiment…