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The results from the latest AAII Sentiment Survey show optimism about the short-term direction of the stock market falling to its lowest level for the month of August. At the same time, pessimism rose back to an unusually high level.
Bullish sentiment, expectations that stock prices will rise over the next six months, fell 5.6 percentage points to 27.7%. The pullback puts optimism right at the breakpoint between typical and unusually low readings. Bullish sentiment remains below its historical average of 38.0% for the 40th consecutive week.
Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, increased 0.4 percentage points to 29.9%. Neutral sentiment is below its historical average of 31.5% for the 16th time in 18 weeks.
Bearish sentiment, expectations that stock prices will fall over the next six months, rose 5.2 percentage points to 42.4%. Bearish sentiment is above its historical average of 30.5% for the 39th time out of the past 40 weeks and is at an unusually high level for the 24th time out of the last 32 weeks. The breakpoint between typical and unusually high readings is currently 40.5%.
The bull-bear spread (bullish minus bearish sentiment) is –14.7% and is unusually low for the 25th time in 31 weeks. The breakpoint between typical and unusually low readings is currently –10.9%.
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 the bull-bear spread.
Continued volatility in the major stock indexes along with inflation, corporate earnings and increased chatter about the possibility of a recession are all likely weighing on individual investors’ short-term expectations for the stock market. Also influencing sentiment are monetary policy, the coronavirus pandemic, politics and the ongoing invasion of Ukraine by Russia.
This week’s AAII Sentiment Survey results:
- Bullish: 27.7%, down 5.6 percentage points
- Neutral: 29.9%, up 0.4 percentage points
- Bearish: 42.4%, up 5.2 percentage points
Historical averages:
- Bullish: 38.0%
- Neutral: 31.5%
- Bearish: 30.5%
The AAII Sentiment Survey has been conducted weekly since July 1987. The survey and its results are available online.
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