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Optimism among individual investors about the short-term direction of the stock market rebounded to a six-week-high, though continues to be unusually low. The latest AAII Sentiment Survey also shows drops in neutral and bearish sentiment.
Bullish sentiment, expectations that stock prices will rise over the next six months, jumped 7.5 percentage points to 26.9%. Optimism was last higher on June 2, 2022 (32.0%). Even with the increase, bullish sentiment is below its historical average of 38.0% for the 34th consecutive week and is at an unusually low level for the 23rd time in 27 weeks.
Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, declined 1.2 percentage points to 26.6%. Neutral sentiment is below its historical average of 31.5% for the 11th time in 12 weeks.
Bearish sentiment, expectations that stock prices will fall over the next six months, pulled back by 6.3 percentage points to 46.5%. Nonetheless, pessimism is above its historical average of 30.5% for the 33rd time out of the past 34 weeks and is at an unusually high level for 22 out of the last 26 weeks.
The bull-bear spread (bullish minus bearish sentiment) is -19.6% and is unusually low for the 24th time in 27 weeks.
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 for 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. The S&P 500 has underperformed following periods of below-average neutral sentiment, though the link is weaker.
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: 26.9%, up 7.5 percentage points
- Neutral: 26.6%, down 1.2 percentage points
- Bearish: 46.5%, down 6.3 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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