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Pessimism among individual investors about the short-term direction of the stock market rose to a five-week high in the latest AAII Sentiment Survey. Neutral sentiment fell, while optimism remained at an unusually low level.
Bullish sentiment, expectations that stock prices will rise over the next six months, fell 0.4 percentage points to 24.3%. Bullish sentiment remains below its historical average of 37.5% for the 50th consecutive week. It is at an unusually low level for the third consecutive week.
Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, decreased by 2.4 percentage points to 31.1%. The decline puts neutral sentiment below its historical average of 31.5% after two consecutive weeks of being above average.
Bearish sentiment, expectations that stock prices will fall over the next six months, jumped 2.8 percentage points to 44.6%. Pessimism is above its historical average of 31.0% for the 53rd time out of the past 56 weeks. It is at an unusually high level for the second consecutive week.
The bull-bear spread (bullish minus bearish sentiment) is –20.3%. This is well below the historical average of 6.7% and is unusually low.
Historically, the S&P 500 index has gone on to realize above-average and above-median returns during the six- and 12-month periods following unusually low readings for bullish sentiment and the bull-bear spread. Unusually high bearish sentiment readings historically have also been followed by above-average and above-median six-month returns in the S&P 500.
Concerns about the economy, inflation, corporate earnings and volatility in the stock market continue to cause many individual investors to maintain a cautious short-term outlook. The majority of this week’s responses were recorded prior to yesterday’s rate hike announcement by the Federal Reserve.
This week’s AAII Sentiment Survey results:
- Bullish: 24.3%, down 0.4 percentage points
- Neutral: 31.1%, down 2.4 percentage points
- Bearish: 44.6%, up 2.8 percentage points
Historical averages:
- Bullish: 37.5%
- Neutral: 31.5%
- Bearish: 31.0%
The AAII Sentiment Survey has been conducted weekly since July 1987. The survey and its results are available online.
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